The #buildbackbetter theme has been trending on social media for months now as people think about how the coronavirus pandemic is changing the way we live and work. There has been much talk of a ‘green recovery’ with the French government even adding in CO2 clauses to bailouts provided to some industries.

Over the course of the year there has been a lot of evidence to suggest that ESG and SRI funds have outperformed during the pandemic, falling in line with or marginally less than mainstream counterparts in Q1 and generally rallying more strongly in Q2, with record inflows being seen into ESG funds over this period. Whilst this may sound like a sweeping statement in favour of Socially Responsible Investment there are some relatively simple drivers behind this, including the fall in oil price, the effects of the COVID lockdown causing prices in Travel and Leisure and Transportation stocks in particular to fall (all areas that SRI funds tend not to invest in) . Meanwhile Tech (think software and industrial technology companies rather than the likes of Facebook) and Healthcare stocks have generally outperformed and these tend to be areas that are often favoured by SRI funds.

A question we are understandably often asked is ‘Is this a fad?’

The answer – No we don’t believe this is a fad and whilst we are not suggesting there may not be a rotation at some point to the above sector performance, we believe that there are structural changes happening in the way we live and work which will be long term drivers for companies, which also fit the criteria for SRI funds. We also think it is fair to say that some of these changes have been accelerated by the Coronavirus pandemic pushing people to adopt new habits and technologies quicker than was the case previously.

What does this mean for advisers and investors?

Under new MIFID II rules coming in 2021 advisers will have to start asking clients about any ethical considerations as part of their fact find process. Good Money Week running in Oct this year is a great time to start the conversation (look out for the next Whitechurch blog on SRI in Oct).

Whilst some argue that if a client has ethical views, they should be entirely invested in an ethical portfolio this strategy may not meet all of a client’s needs e.g. clients needing a higher level of income. In this instance you could consider investing a portion of the client’s money into ethical portfolios whilst looking at other ways to meet the income requirement.

What about Whitechurch portfolios?

Whitechurch is here to help. Take a look at our Ethical Toolkit to help get the conversation started with clients or get in touch with a member of our Business Development Team today.

Whitechurch run a range of Ethical portfolios which can be accessed directly or via a range of platforms. Further information, including our three-year Ethical performance, helpful guides and interesting blogs can be found on our Ethical Page Here.

We also consider many of the structural change themes mentioned in our mainstream portfolios and have for some time been invested in funds which focus on renewable energy, carbon reduction and impact themes such as healthcare and the move towards a more online and automated world. To find out more contact your Whitechurch BDM at dfm@whitechurch.co.uk or on 0117 452 1207.

FP3066.02.09.2020