We are delighted to welcome this long-established fund to The Big Exchange
We are delighted to welcome this long-established fund to The Big Exchange. Jupiter Fund Management plc is listed on the London Stock Exchange and has built a reputation as a high conviction asset manager whose philosophy is ‘the value of active minds’.
The firm is a pioneer in sustainable investing and is a constituent of the FTSE4 Good Index1, a benchmark used by many ethical funds. It has been a signatory of the Principles for Responsible Investment since 2008.
Jupiter Ecology Fund was the firm’s first environmental-focused fund and has been investing since 1988 in companies which solve challenges such as climate change and natural capital depletion. The manager believes companies can drive positive real-world impacts by enabling the transition to a more sustainable world.
Below we outline some of the main attributes of the fund and give an example of a company they invest in, to help you decide if it could be worth considering for your investment portfolio.
The aim of this fund is to provide capital growth with the prospect of some income, over the long term (at least five years) by investing in shares of companies whose core products and services address global sustainability challenges. At least 70% is invested in such companies whilst up to 30% may be invested in other assets, including funds and cash.
There is a bias to mid-cap size companies and a blend of growth (the potential to grow their earnings significantly over time) and value (companies that are trading at a significant discount to their book value) investment styles. The fund typically holds 40-60 stocks with position sizes of 1-5% of the portfolio.
The fund is managed by Noelle Guo and Jon Wallace and the experienced and well-resourced Environmental Solutions team with input from the Sustainable Investments and Global Equities teams, as well as the governance and data teams. The managers believe that as environmental issues become ever more critical to global development, so too do environmental solutions, providing a potential source of long-term investment returns.
The sustainable solutions thematic approach typically means investing in companies generating most of their revenues from products and services that assist with climate change mitigation, transition to a circular economy, waste prevention and recycling, protection of healthy ecosystems, pollution prevention control, and sustainable use and protection of water and marine resources.
Companies must meet both a comprehensive financial assessment and environmental and social criteria including a full range of ethical exclusions. Although the investment universe is largely influenced by the focus on solutions, companies that generate more than 10% of revenues from any combination of armaments, alcoholic drinks, tobacco, pornography, nuclear power, and gambling will be excluded.
The fund is well-diversified both geographically and by industry sector. The portfolio has 52% in the Americas, 33% in Europe & Middle East and 10% in the Asia Pacific region. The largest sector exposures are 15% in Electrical Equipment, 13% in Commercial Services &supplies, and 10% in both Chemicals and Semi-Conductors & semi-conductor Equipment.2
Currently c.88% of the fund is invested in companies we would classify as offering solutions to social and environmental challenges and this has strongly contributed to the gold medal. There is some exposure to controversial activities, though the reasons are more understandable when one considers what the companies' core products/services are. The fund group maintains an ESG (Environmental, Social & Governance) screening process, as well as a relatively robust list of revenue-based exclusions.
Although Jupiter has reported a high level of engagement for this fund (84% of companies), there is no fund level reporting or progress tracking. At a firm level, Jupiter is a member of various initiatives such as UKSIF, the 30% Club Investor Group and the Net Zero Asset Managers Initiative. They are also signed up to various charters including the UK Stewardship Code and the Women in Finance Charter and is a founder signatory to the CDP (a global disclosure system to manage environmental impact).
Reporting is good, with an annual impact report outlining some tangible outcomes, for example, litres of water treated, and ESG related metrics. A fund impact report provides stock-specific impact metrics and sustainability alignment, as well as providing voting and engagement data. It also provides some comparative ESG (Environmental, Social & Governance) metrics for the fund against its IA (Investment Association) Global peer group.
Jupiter produces several firm-wide documents including a stewardship report which outlines company related governance, as well as broader firm lobbying on specific issues (e.g., healthy food). It also provides information on some targeted engagements with outcomes and objectives for change. Jupiter publishes ESG (Environmental, Social & Governance) and responsible investing insights via its online "Academy" which is publicly available.
The fund therefore scores 2/3 for both positive influence and impact evidence. To improve further we would like to see holdings justifications/ sustainability theses for all companies and more detailed engagement reporting at a fund level, particularly in relation to tracking of progress.
The managers pay close attention to the portfolio’s alignment with the UN SDGs (Sustainable Development Goals), the UN Global Compact and the 1.5-degree climate goal as set out by the Paris Agreement. We found that the fund has greatest exposure to SDG 6 (Clean Water and Sanitation) at 10% of the portfolio, SDG 9 (Industry, Innovation & Infrastructure) at 11% and SDG 12 (Responsible Consumption and Production) at 30% of the portfolio.3
Borregaard operates one of the world's most sustainable biorefineries, using renewable raw materials to produce environmentally friendly biochemicals. These enable the substitution of oil-based chemicals with natural alternatives, derived from wood waste, for use in agriculture, construction, pharmaceuticals and cosmetics, foodstuffs, batteries, and biofuels. Borregaard has invested in a marine biotech company which develops ingredients from the bio-refining of kelp. The firm’s products can significantly lower carbon footprints and they are working to improve sustainability throughout their supply chain. An independent third-party is used to assess the product portfolio, mapping the environmental impact from raw materials to finished products. Borregaard has been recognised for sustainability leadership in climate change, forests, and water security by the environmental charity CDP, earning a place on its prestigious ‘A’ lists for climate change and forest. It received an A- for water security. The company has committed to science-based targets (SBTi) to further reduce greenhouse gas emissions.4
1https://www.jupiteram.com/uk/en/professional/about-jupiter/
2 Fund provider factsheet 31/3/2023
3 Big Exchange Impact Assessment February 2023.
4 https://www.borregaard.com/media/kmxo2iuq/borregaard-annual-report-2021.pdf
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