This fund does not follow the general trend of ethical investments or sustainability indices, but introduces a novel management style among funds in the sector, and therefore enjoys an image of an "eco-friendly fund" in Germany.
Anne Darling Barker manages the fund and is fully convinced of its great success. In Italy, the fund has been very well received since its launch at the end of July last year, and although the management concept was in a trial phase for the first six months and, consequently, there has been no promotional campaign to date, money flowed into the fund quickly.
A company not only needs to have a solid financial foundation to be included in the portfolio, but it must also meet a series of both negative and positive criteria. Companies involved in weapons, military applications, nuclear energy, tobacco, gambling, alcohol, and environmental destruction are immediately excluded. Following this exclusion, positive criteria such as environmental responsibility and social responsibility will be examined.
An external environmental database provides the basic tool for selecting a group of 1000 companies that have passed the initial screening. Anne Barker is very strict when setting the fund's criteria: "The database is much less discriminatory than my selection process, which ends up with a group of 50 to 60 stocks." The fund manager gives an example: the food group Nestlé easily meets the database's already stringent requirements. "But Nestlé sells powdered milk to Africa, and to be usable, this powder has to be mixed with local water that is often not pure." Given the risks this poses to children, Nestlé was asked to stop exporting powdered milk to these regions internationally. However, the company continues to do so.
This is one reason why Anne Barker rejected Nestlé as a candidate for the fund. Something similar happened to the mobile phone company Vodafone. It doesn't stand a chance at all, since part of its Mannesmann subsidiary is involved in tank production.
Anne Barker clearly disagrees with the strategies used by the Dow Jones Sustainability Index funds. While she acknowledges the importance of sustainability, she believes the selection process is not rigorous enough. The index includes oil companies, which she excludes, just as she excludes airlines and companies with mining holdings. According to the fund's bylaws, investing in these stocks would be possible, but because they are always associated with negative environmental impacts, they are not viable from her perspective.
Furthermore, the Dow Jones Sustainability Index has a "hierarchical" component, as the abbreviated list primarily contains the leading companies in the respective industry and considers it as a whole. Anne Barker, on the other hand, mixes the Global Environmental and Ethical Fund's portfolio with large companies, which contribute slightly more than two-thirds of the stocks, and small companies, which contribute slightly less than the remaining third. The asset allocation itself is based solely on stock selection, making it somewhat secondary. Currently, 60% of the fund's volume is invested in Europe, 32% in North America, and 8% in the Pacific region. The consumer goods and consumer products industries constitute the largest share.
There is no guideline for the fund, since according to Anne Barker there is no fair criterion.
The fund invests in so many segments that no single benchmark offers a fair comparison. Consequently, the fund's performance can only be measured based on absolute returns. Stock selection is carried out monthly, and if a stock no longer meets the fund manager's strict criteria, it is sold. Another reason for selling a stock is when there are significant changes in the corporate environment or management. The fund manager states that she is more critical of smaller companies, as they would have to make a particularly positive contribution in terms of environmental sustainability and social responsibility to be selected.
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