Author: stolinski

Disclaimer – it’s just my opinion maaaaan

Triodos Sustainable Equity Fund

❤

First off, I’ve got to say I LOVE Triodos. I don’t have this product but i have others from Triodos and I think they are great.

Why do I like them? Well two main reasons.

1. They are actually ethical.
2. They provide a viable alternative to mainstream banks. Since 2017 they even offer a current account.

Screening

OK but as we know ethical can mean many things and the word is often stretched to breaking point by unscrupulous agents. So let’s take a look at Triodos’s ethical criteria for the fund. It comes in 3 steps!

1 Positive Screening

• Sustainable food and agriculture
• Sustainable mobility and infrastructure
• Renewable resources
• Innovation for sustainability
• Circular economy
• Prosperous and healthy people
• Social inclusion and empowerment

2 Negative screening

The negative screening is immediately available as a pdf, no hunting around is required. The screening covers the same ground as normal but in more detail and great scope. Let’s take tobacco for example:

Tobacco products include finished products such as cigarettes and cigars, but also key materials necessary for the production thereof, such as cigarette paper and filters. Triodos Bank believes that people are free to pursue their activities of choice insofar as these are legal and do not negatively affect others or the environment. Triodos Bank chooses to limit its involvement with tobacco products as they contribute to serious health problems and negatively impact others, e.g. in the form of passive smoking.

Triodos Bank excludes companies that:
Produce tobacco products or sell such products under their own label.

I think that is very well written (since it chimes well with my own views perhaps!)

3 Ongoing monitoring

We conduct an integrated financial and sustainability analysis on each prospective company. This looks at the potential impact of economic, social and environmental changes on a company’s business model and future financial performance.

This is a bit buzzwordy yes, but i already trust Triodos. And of course they do ongoing analysis.

Funds normally have 2/3 of these tests, but this is all 3 and all 3 done well (And the positive screening is seldom done and it is the most important part.). That makes this fund much more ethical in my opinion. What i am now calling ‘hard ethical.’

Holdings

So let’s check the top5 holdings:

• Central Japan Railways – Japan’s most profitable and highest throughput high-speed-rail operator
• Anthem Inc – US health insurance company
• Roche – Swiss multinational healthcare company
• Cisco Systems – US multinational technology conglomerate
• Bridgestone Corp – Japanese multinational auto and truck parts manufacturer

Hmm I’ve got to say I’m a bit disappointed here:

• Trains
• Two healthcare multinationals 😦
• Cisco are a huge company. There are only three mentions of ‘sustainable’ (another three for ‘sustainability’, ‘ethical’ has two) in their 2017 annual report.
• Bridgestone are the world’s largest tyre manufacturer.

That is not impressive at all. To be honest only the highspeed train company seems sustainable to me. This is disappointing. 35% of investments are in the USA. I also find that curious. From the KIID: At least 67% of the fund’s net assets are invested in shares of large cap companies and up to 33% of its net assets in shares of small and mid cap companies. I guess that explains things a bit.

VERDICT

Triodos are a big player and can be trusted, despite their disappointing top5. This is a great ethical investment, however i doubt whether it is hard ethical as with previous Triodos investments (for example Thrive Renewables). Still it is at least sustainable based on positive screening and can be expected (with no guarantee) to give a good return. I’ll be looking into this myself.