Stockspot’s Sustainable Portfolios have proven popular since launching in July 2020, and we wanted to provide an update to clients on how these portfolios have performed, as well as provide insights on sustainable investing market trends for 2021.
Sustainable Portfolios Performance
Over their first 12 months, the Stockspot Sustainable Portfolios have delivered returns of 5.6% to 12.9% (after fees) to 30 June 2021.
|Returns since inception (1 July 2020)|
How has performance varied from the Model Portfolios?
The Stockspot Model Portfolios have performed better over the last 12 months due to a higher weighting to emerging markets, as well as energy and mining companies who have benefitted from rising commodity prices.
The Stockspot Sustainable Portfolios have a lower exposure to these sectors because of our screening process which focuses on positive impact scoring (e.g. removing fossil fuel, coal, thermal mining, and many financial companies).
While the Model Portfolios have performed better in the 12 months up to June 2021, it’s worth noting that the underlying investments in the Stockspot Sustainable Portfolios have performed better over 3 years. This is due to their larger exposure to technology and the U.S. share market.
For example, sustainable Australian shares (ASX: FAIR) has outperformed Australian shares (ASX: VAS) over 3 years, but underperformed over the last 6 and 12 months. This illustrates the importance of time in the market.
|Sustainable Australian shares (FAIR)||Australian shares (VAS)|
|3 years (p.a.)||10.8%||9.7%|
Other reasons for performance variations
It’s important to ignore monthly returns which are often impacted by short term trends. Instead, focus on your long term strategy. 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 outperformance and underperformance. Ideally, it’s a values-based way of investing that will lead to returns over the long term.
Sustainable investing in 2021: Market trends and rise of ESG
Interest due to bushfires and COVID-19
2020 saw a surge of interest investors wanting to play a part in a sustainable future. This was fueled by the Australian bushfires and impact of COVID-19, leading to investors demanding products that have environmental, social, and governance (ESG) frameworks.
High growth rate
Australian investors piled in $1.8b of their money into sustainable ETFs on the ASX in the last 12 months. There’s now $4.6b invested in sustainable ETFs in Australia across 21 products. Over the last five years, these investments have grown at a rate of 89% per year.
What’s next for Sustainable Investing
Large players focusing on sustainability
Many large global institutions are making sustainability a key component of their investment approach, such as Blackrock (the largest fund manager in the world). Sustainability conscious investors are shifting their allocation from traditional funds into sustainable funds with the majority focusing on climate change and clean energy as the biggest driver.
Continued demand for sustainable investing
Demand for sustainable investing will continue in a post-pandemic market. U.S. President, Joe Biden, has already passed legislation to combat climate change, there is increasing research and demand for electric vehicles and renewable energy, and countries around the world are pledging 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). This has helped us beat 100% of similar diversified portfolios over the last 5 years.