Since launching in July 2020, Stockspot’s Sustainable Portfolios have been popular with investors. In this blog we discuss how these portfolios have performed. We also provide insights on sustainable investing market trends for 2023.
Sustainable Portfolios Performance
Over the 12 months to 30 June 2023, the Stockspot Sustainable Portfolios have delivered returns of 8.3% to 14.4% (after fees).
How has performance varied from the Model Portfolios?
The Sustainable Portfolios have had similar performance to the Stockspot Model Portfolios over the past year. Both portfolios offer a similar level of risk which takes into account broad diversification across different assets, countries and market sectors.
The Stockspot Sustainable Portfolios have a lower exposure to the energy and financial sectors because of our screening process which focuses on positive impact scoring (e.g. removing fossil fuel, coal, thermal mining and many financial companies).
This has led the sustainable Australian shares ETF (ASX: FAIR) to slightly underperform the Australian shares ETF (ASX: VAS) over the last 12 months and three years. This is largely due to commodities and banks performing well in an inflationary and rising interest rate environment.
|Sustainable Australian shares (FAIR)||Australian shares (VAS)|
|3 years (p.a.)||5.0%||11.0%|
Other reasons for performance variations
Performance differences between the Stockspot Model and Stockspot Sustainable portfolios may also arise due to the timing of distributions/dividends, the frequency of rebalancing, and when each ETF was phased into your portfolio.
It’s important to focus on long-term returns and your long-term strategy rather than focus on monthly returns or short-term returns which are often impacted by short-term trends. After all, one of the key tenets of investing is the compounding effect that takes place over many years. Sustainable investing – like all types of investing – will go through periods of ups and downs. Ideally, it’s a way of investing that aligns more closely with your values that can lead to returns over the long-term.
Sustainable investing in 2023: Market trends
Interest due to environmental disasters and pandemics
Over the last few years, interest in sustainable investing has continued to grow with a surge of interest in investors wanting to play a part in a sustainable future. This trend accelerated after the Australian bushfires in 2020 and the impact of COVID-19, leading to more investors wanting to invest in companies with stronger environmental, social and governance (ESG) frameworks.
High growth rate
Australian investors piled in over $1 billion of their money into sustainable ETFs on the ASX in the last 12 months. There’s now over $10 billion invested in sustainable ETFs in Australia across 46 listed products. Over the last five years, these investments have grown at a rate of 51% per year. There is a range of innovative ESG ETFs that have recently come to market such as carbon credit ETFs and green metal mining ETFs, and we believe that more ESG products will get launched.
What’s next for Sustainable Investing
Large players focusing on sustainability
A larger number of asset managers are making sustainability a key component of their investment approach. Sustainability-conscious investors are shifting their allocation from traditional funds to sustainable funds with the majority focusing on climate change and clean energy as the biggest driver.
Continued demand for sustainable investing
Many global political leaders are looking to enact legislation to combat climate change, there is increasing research and demand for electric vehicles and renewable energy and countries around the world have pledged to join the Paris Agreement and be carbon-emission free by 2050. The market reflects global and societal sentiment, and sustainability is firmly on the agenda.
Long-term performance of your sustainable investments
Both Sustainable Portfolios and Model Portfolios are built using Nobel Prize Winning Research of diversification across asset classes using low-cost exchange traded funds (ETFs).