As we were updating our ESG database we noticed Schroders have recently binned all their holdings in UK, European and US equity funds, and deployed the capital entirely into global equity and emerging market funds.
With that in mind we caught up with Alex Funk, who runs the model portfolios at Schroders and who told us this was a feature and not a bug of the way he’ll be doing ESG portfolio management from now on.
He says: “We have consolidated the equity holdings of the sustainable portfolios. The allocation will now be represented through global equity and emerging market equity.
“A global approach aligns with the nature of many sustainability challenges, such as climate change and human rights, which require collective action across borders.
“Many sustainable-focused equity funds have a global remit, and this provides us with a wider opportunity set to select best-in-class funds from.
“Allocating specifically to global emerging markets also reflects where some of the greater impact is required.”
One of the features of our ESG database is the relative lack of funds - particularly active funds - in some regions.
An extreme example of this is the complete lack of any Japanese equity funds held by the allocators we follow in our ESG database.
This contrasts to the 21 active Japanese equity funds in our non-ESG database.
So perhaps the move taken by Funk is bowing to the inevitable.
Among the global equity funds they hold is Ninety One Global Environment, which is now the most owned global equity fund among all of the allocators we cover, appearing in 12 ESG portfolios.
Schroders are also invested in the most-owned ESG bond funds among the allocators we cover, with positions in Rathbones Ethical Bond, which appears in 10 portfolios, and Edentreet Responsible and Sustainable Bond, which is the most owned short-duration fund in the ESG portfolios we cover.
Interestingly, we recently caught up with Bryn Jones, who runs that Rathbones product, and he mentioned that having been short duration for a long time, he has recently begun to add duration to the portfolios he runs.
