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Our ‘EKO’ portfolio one year on

Katy Owen explains the progress of one of our ethical model portfolios

As many of our clients will know, it has been a difficult year for markets. There are a number of culprits behind the volatility including Oil prices, Chinese data and of course a Referendum. We have been reassured by the performance of the Thomas and Thomas mainstream portfolios throughout this time, but how has our Ethical range performed? As we reach the first anniversary of the ‘EKO’ portfolio, it seems a good time to see how this unique collection of funds has weathered the past 12 months.

As first reported back in 2015, I wanted to create a portfolio that focused solely on environmentally friendly investment funds. The strict screening process meant that my fund selection was very limited so I knew that both volatility and performance would be different from any of our other Thomas and Thomas portfolios. The result of my extensive research led to a careful blend of ten funds that invest in stocks which positively support the environment and climate change whilst also avoiding investment in non-sustainable timber, nuclear power and intensive farming. 

In terms of risk, we expected the EKO portfolio to be a level three from 1-5 on our Thomas and Thomas risk scale. I have therefore compared its performance to the FTSE 100 (London Stock Exchange) for a loose volatility guide.

Over a one year period, the EKO portfolio has outperformed the FTSE 100 with a gain of 8.91%* against 6.06%*. The performance data has been taken from independent reporting powered by Financial Express and both results have included reinvested dividend income. Looking at performance charts there are many points within the year where the EKO did not fall as far as the FTSE 100 and even some spots where it went up when the FTSE 100 was falling. This confirms my prediction that the EKO funds would behave in a different way from the FTSE 100.

The EKO portfolio still endured a volatile year but the research shows a much smoother journey throughout the year in comparison to the benchmark. There are various stocks that, by its very nature, the EKO portfolio avoids investing into. An example of this would be oil shares. Oil is currently valued at $44 a barrel. As well publicised by the media – the price of oil plummeted between December 15 and April 16 reaching a low of $28 – this directly affected many oil and mining companies within the FTSE 100. Without this exposure, the EKO rallied against the FTSE at that time.

Another matter discussed between Darren and myself is that the ethical investment arena does not hold as many ‘tourist investors’. From our experience, investors who choose to invest into Socially Responsible Investments, do so because of a desire to invest ethically. They are not so driven by performance. This means ethical investments are sometimes overlooked by mainstream investors. In times of market uncertainty the mainstream funds can suffer when investors move their money around. Meanwhile ethical investors will often sit tight. This is usually due to the lack of Socially Responsible Investments available within the market, they have nowhere to move their money to – resulting in smoother volatility and a more stable investment domain.

Nobody truly knows what the next year holds in terms of economic outlook but at Thomas and Thomas we strive to find the opportunity in every so-called ‘economic crisis’ that the media are predicting. In the meantime we are very proud of how a portfolio created firstly to support the planet and secondly to make gains, could achieve so much in its first year. Proving that you should never forget the ‘Investing’ in ‘Socially Responsible Investing’.

*Usual investment risk warnings apply


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