Heartwood Investment Management, the boutique owned by Sweden's Handelsbanken, has launched four multi-asset funds using sustainability critiera that aim to provide a boost to the UN Sustainable Development Goals (SDGs).
The Defensive, Cautious, Balance and Growth Sustainable portfolios rely on negative screening for tobacco, alcohol, weapons, adult entertainment and gambling; apply ESG integration to identify and incentivise companies and governments on their ESG impacts; and seek to impact in areas such as social housing and renewable energy in line with the SDGs.
As multi-asset funds, these also seek to invest in collective investments, not just direct equity and debt instruments. Alternatives are also part of the mix, in areas such as UK renewables infrastructure, global property, and some use of hedge funds for both the equity and credit asset classes.
Noting the approach, co-manager Matt Toms said: "Negative screening is not enough; people want to do good."
This is a trend that has been increasingly noted on the demand side when talking to potential investors, he added.
The funds are hitherto targeting UK investors with sterling denominated shares only and no current distribution mechanism to, for example, port the funds back to Handelsbanken's home market of Sweden - where it has a significant range already competing in the domestic market. However, it is understood that Handelsbanken's domestic range is under ongoing scrutiny - for example, because a number of its legacy funds are not attracting significant new capital - and that it may be looking at other examples of Nordic managers that have moved to shore up pan-European distribution. That could create an opening for Heartwood IM to place its funds in front of Swedish or other Nordic investors.
Ben Matthews, co-manager, said: "Having successfully trialled these strategies for over three years, we've seen significant growth in demand across our entire investor base, and we expect this trend to continue. Our trial period revealed that our sustainable strategies achieved similar returns to our core strategies and so we are confident that investing sustainably does not compromise performance".
According to data provided by Heartwood, there is evidence in the market already of sustainable active management that is beating the benchmark, such as the BMO Responsible UK Income and Liontrust UK Ethical funds outperforming the MSCI UK over the past five years to September 2019.
Noland Carter, head of Heartwood IM and CIO, noted that the approach to the multi-asset funds, including investing in other funds, was a deliberate one.
"Unlike other strategies, our funds are truly multi-asset., not just equities or bonds, and we provide solutions across the entire risk spectrum."
"We're targeting positive outcomes across the whole of ESG, not just one theme, and by including ESG-integrated and impact investments rather than relying on negative screening, we can access a much broader investment universe."
Heartwood began research into its multi-asset sustainable strategies in 2013. Total AUM in the sustainable funds range measured some £30m as of the end of August 2019.