Ethical Temperate Portfolio hits 3yr Milestone

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  • August 17, 2020

The P1 Ethical Temperate portfolio was launched on 1st August 2017 and we are pleased to update investors and advisers as it reaches its three-year anniversary. The Ethical Temperate Portfolio is the first of our three ethically invested model portfolios to pass this milestone. Our other two ethical portfolios, managed on the same principles will reach their three-year milestones in a few months’ time

Performance: ethical alpha?

We are delighted that our Ethical Temperate portfolio has significantly outperformed its benchmark, the IA Mixed Investment 40-85% Shares, over the last three years. It has also outperformed its P1 Hybrid and Passive model portfolio equivalents over this period. P1 Investment Management is demonstrating that there is no performance disadvantage by investing in a more ethically conscious way, indeed, we believe that it may prove to be an advantage.

Ethical Temperate Portfolio performance chart over 3 year period

Strong outperformance was seen through 2019, particularly in the second half. This was driven by the broad-based strong performance of ethical and sustainable funds, and a growing enthusiasm by the wider market for more ethically conscious companies, a trend that has continued over 2020.

Through the COVID selloff and recovery, the model held its own against the benchmark, and is only 4.04% down over the year to date (to 01/08/2020). While the use of real assets as diversifiers and our aversion to Gilts meant that the portfolio suffered during the depths of the crisis, this proved short lived as the portfolio rebounded, regaining any lost ground by the first week of April.

We believe that the COVID crisis is likely to accelerate the growing trends that are already present in the economy, society and markets, ethical and sustainable investment being one. Consumers and investors are increasingly looking for companies that mirror their values, and executives are adapting their businesses to reflect this. This is complemented by professional and institutional investors finding that companies with high ethical and sustainable credentials can make better investments. This should make an increasingly fertile pool of investments for ethical funds and the growing number of fund launches in this area allows us increasing choice, both from an ethical and investment perspective.

Ethical can bring more than just alpha

Ethically invested portfolios are more than just performance. At P1 we dig beneath managers’ claims to make sure our ethical investment portfolios meet the highest standards. Many managers desire a green makeover, without the level of commitment investors would wish. The Ethical Temperate portfolio benefits from P1’s extensive vetting of ethical fund managers. We carefully select funds with the most meaningful ethical investment policies, and ensure they are robustly applied to their investments, and themselves as a company; our engagement has led to fund houses changing their business practises towards the requirements they ask of their investments.

Over the last three years our engagement has covered areas such as addressing aggressive tax avoidance strategies by companies, and governance issues such as the gender pay-gap, zero-hour contracts, and at board-level diversity and excessive remuneration.

We have and will continue to be unafraid to push for higher standards on existing issues or raise new ones.  When our external ethical oversight committee mandated our progressive fossil divestment programme in late 2018, 42% of our Ethical Temperate Model was already invested in fossil divested funds.  Now, this model is 84% in fossil divested funds. During this programme, some managers have heeded our conversations to adopt tighter fossil requirements, while others have been replaced. Our strategy is to make all our ethical investment portfolios 100% fossil divested and we are close, if not already successful. But before declaring success we want to ensure the funds have adopted fossil fuel divestment as an investment policy to ensure there is no backwards slip in our portfolios.

Net-Zero Carbon Target logo - target for ethical and sustainable investment

Investors in the Ethical Temperate portfolio have benefitted from our leadership on engagement. For climate-friendly investing, fossil divestment is an initial step, reducing carbon emissions and targeting net zero is the end goal. Ethical investors should show leadership, and as commitment to this belief we developed the Net Zero Carbon 10 investor initiative (NZC10), with a ‘better than Paris’ target for neutrality by 2030. At launch in July 2019 NZC10 was adopted by funds with assets totalling just under £2 billion. On its first anniversary we now have £3.4 billion signed up to NZC10 across five fund houses.


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Posted By Will Dickson

Chief Investment Officer Will Dickson is a Chartered Wealth Manager as part of the Chartered Institute of Securities and Investment (CISI) qualification scheme. This recognition was obtained following an MSc in Finance and Investment from the University of Exeter, and an Accounting and Finance BSc from the University of Bath. Will’s exceptional talent is recognised by CityWire’s Wealth Manager, having been named as one of the UK’s Top 30 investment managers under the age of thirty for the last three years. Will manages and oversees P1’s range of investment portfolios. Working with the Investment Team, Will shapes the investment policy and fund selection for our Passive, Hybrid and Ethical and Sustainable portfolios. In conjunction with managing the fund portfolios, he oversees and our AIM Inheritance Tax and Tier 1 Investment Visa equity portfolios. Will has joint written articles with P1’s Head of Research, Dr Rayer. Their article “Hypothesis: Risk, like Mass and Energy, can neither be created nor destroyed” featured in the CISI’s The Review of Financial Markets. In addition to contributing to articles with Dr Rayer, Will often delivers P1 CISI Endorsed lectures to Independent Financial Advisers. You can see Will’s take on weekly investment news here.