You can now invest in Triodos managed funds in your ISA on The Big Exchange. Read more about them here.
We are delighted to welcome Triodos, a firm wholly committed to responsible banking and investing, to The Big Exchange. Three funds have been put through our independent assessment process and Triodos Pioneer Impact is awarded a gold medal. Triodos Global Equities Impact and Triodos Sterling Bond Impact each receive silver medals. To learn more about Triodos and some key features of these funds, read on.
Parent firm Triodos Bank, founded in 1980, is an ethical bank based in the Netherlands. Its mission is to provide financial and banking services for savers, investors and organisations who want to change the world for the better. These funds are managed by Triodos Investment Management which has 30 years' experience in investing for impact. As a result, the team has in-depth knowledge and expertise in making money work for both people and planet.
An initial screen looks for companies that have a positive impact on society and the environment. The managers focus on 7 themes, tracked against the United Nations Sustainable Development Goals (SDGs), which are instrumental in the transition towards a sustainable economy.
In line with these themes, they select companies which actively contribute to a sustainable economy through their products, services, and processes. The managers then combine financial and sustainability analysis to identify what is driving long-term value creation and to assess the impact of material ESG (Environmental, Social & Governance) factors.
All companies held in the portfolios must comply with Triodos’ strict minimum standards and the managers regularly engage with them to promote and encourage sustainable practices. They exercise their shareholder voting rights to ensure that financial profits are never made at the expense of people or planet.
Triodos is clearly a leader in advocating for impact investing, however, we would like to see more detailed evidence of the results of their efforts. We give them a score of 2 out of 3 for positive influence. There is a good reporting of the degree of impact achieved, including a comprehensive quarterly report on the contributions made to the impact themes and the SDGs. Again, this would benefit from more information data on outcomes and monitoring of progress so the score for transparency and evidence is 2 out of 3. 1
We can see that Triodos has a clear process for delivering good outcomes but how is this reflected in the different funds? Each has its own specific objectives so below we highlight these and describe the makeup of the portfolios. We conclude with an outline of a company that the fund invests in and tell you a bit about what it does to show how your money can count for more.
The fund aims to generate positive impact, and competitive returns, from a concentrated portfolio of large cap equities (shares in a company) which offer sustainable products and services. The manager believes that if multinational companies begin to move in a more sustainable direction, even one step at a time, the wider impact will be significant.
The funds regional and industry exposures are determined by stock selection (which means focusing primarily on a company's attributes rather than wider economic drivers). The portfolio may therefore look quite different to its benchmark index, although it is well diversified geographically. Notably, Japan accounts for 27% of the portfolio, the United States 23% and Germany 12%. The managers currently believe the Japanese market offers both attractive valuations and improving sustainability trends. 2
The largest sector weightings are in information technology and healthcare which represent 20% and 16% of the portfolio respectively and reflect the themes of ‘Innovation for Sustainability’, and ‘Prosperous and Healthy People’. 2
The Sustainable Development Goals with which the Fund has the greatest alignment are SDG 2 (Zero Hunger), SDG 3 (Good Health and Wellbeing) and SDG 12 (Responsible Consumption & Production). These account for 6%, 11% and 9% of the portfolio respectively. 1
This is where we take a company that the fund invests in and tell you more about what it does to show you how your money can count for more.
Top 10 holding Danone is a food multinational on course to achieve 100% B Corporation certification, demonstrating that it balances purpose with profit and considers its impact on employees, customers, suppliers, society, and the environment. Its activities encompass: essential dairy and plant-based products, water, and infant and medical nutrition. The company aims to serve the growing demand for natural, nutritious, and environmentally friendly products and strives to improve nutritional quality by developing and promoting healthier alternatives. There is also a strong animal welfare programme in place. Danone contributes to the Triodos transition theme of sustainable food and agriculture.
This fund follows the same investment approach as its Global Equities stablemate but targets opportunities in mid and small cap listed companies that are innovators and pioneers in the transition to a more sustainable society.
These companies tend to have greater potential for growth than larger companies, although investors should be aware that such opportunities may come with higher risk. For example, they are more likely to have a single product or service but tend to be willing to listen to and work with their investors.
The fund offers a good geographic spread, with a preference for developed markets. The US accounts for 39% of the portfolio, Japan 23%, and Denmark 8%. The main sector exposures are industrials which make up 24% of the fund and information technology at 20%, reflecting the themes of ‘Renewable Resources’ and ‘Innovation for Sustainability’. 2
The Sustainable Development Goals with which the Fund has the greatest alignment are SDG 3 (Good Health and Wellbeing), SDG 6 (Clean Water & Sanitation) and SDG 12 (Responsible Consumption & Production). These account for 14%, 16% and 19% of the portfolio respectively. 1
This is where we take a company that the fund invests in and tell you more about what it does to show you how your money can count for more.
Bakkafrost, based in the Faroe Islands, is a leading producer of top-quality salmon which provides a sustainable source of protein to feed the world’s growing population. The company offers a wide range of healthy and nutritious salmon products and has a low carbon footprint and efficient land use throughout its operations. Its mission is to make it easy and convenient to live a sustainable and healthy life and it continuously introduces new sustainability measures for the business. Bakkafrost recycles the water in their hatcheries and provides homes in the Faroe Islands with electricity from biogas. It has also commissioned a fully electric workboat, which does not emit any greenhouse gases. The business fits with the Triodos transition theme of sustainable food and agriculture.
This fund aims to generate positive impact, along with a stable income, from a concentrated portfolio of investment-grade (the highest quality) bonds issued by sustainable listed companies, green and social bonds, and bonds issued by the UK government (known as gilts).
Bonds and gilts are generally considered to be lower risk and therefore may produce lower returns than investing in shares of companies, such as those found in the Triodos equity funds.
The managers select issuers and projects on the basis of how the proceeds will be used to contribute to the impact team’s seven sustainable transition themes. They also consider whether this is accompanied by a mission and culture, supported by management, to ensure positive impact. At the same time, they monitor economic trends to help form their views on interest rates and the credit cycle which are particularly important for bond investors.
Triodos uses its expertise as a pioneer in the field of impact investing to encourage organisations to issue green and social bonds which have potential to deliver positive change to society. The current portfolio breakdown shows that 47% of the portfolio relates to the theme of ‘Social inclusion and empowerment’ and 26% to ‘Sustainable Mobility and Infrastructure’. 2
The Sustainable Development Goals with which the Fund has the greatest alignment are SDG 1 (No Poverty), SDG 6 (Clean Water & Sanitation) and SDG 11 (Sustainable Cities & Communities). These account for 31%, 6% and 13% of the portfolio respectively. 1
This is where we take a company that the fund invests in and tell you more about what it does to show you how your money can count for more.
The fund holds a bond issued by East Japan Railway Company which provides rail transport in Japan, including the bullet train network and the Tokyo metropolitan network. The company is investing in technology to integrate transport, shopping, and payment using stations as hubs for interaction. Public transport is considered more environmentally friendly than cars, and Japan Railway aims to cut its carbon emissions by increasing the efficiency of trains and company-owned thermal power stations. It is also introducing hybrid trains and developing fuel-cell railcars powered by hydrogen. Security and safety have been improved with sensor technologies for platforms and level crossings. The business fits into the Triodos theme of Sustainable Mobility and Infrastructure.
1 Source: The Big Exchange Impact Assessment @ Feb 2022
2 Source: Fund factsheet 31/1/2022
Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
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