Virgin Money launches new ‘Climate Change Fund’

As consumers increasingly look to go green, research reveals that investing in environmentally aware companies can improve investment performance.

Virgin Money is launching the innovative Virgin Climate Change Fund which will invest in high performing, environmentally focused companies to drive market beating investment returns.

Unlike typical ‘green’ funds, The Virgin Climate Change Fund can invest in all industry sectors but will only invest in companies with lighter than average environmental footprints for their sector. This ‘lighter footprint’ strategy aims to capitalise on research which suggests that companies with a strong environmental focus can outperform their ‘dirtier’ competitors.

This new fund comes at a time when consumers are increasingly demanding more information about the environmental damage companies cause. Research from Virgin Money reveals that up to 29 per cent of consumers – around 10.9 million people – have favoured products and services from environmentally aware companies in the past year as they have woken up to the issue of climate change. And around 68 per cent of people say if data on companies’ carbon footprints was more readily available they would pay more attention to the issue.

To launch the fund Virgin have teamed up with leading asset management firm GLG Partners, who will act as the fund advisors, and leading environmental research organisation Trucost PLC, who will provide the environmental data. Trucost wrote the UK Government's environmental reporting guidelines, published in 2006.

Until now GLG has typically only worked for high net-worth individuals and financial institutions and has a record of strong and sustained performance. Since launching their first fund in 1997, GLG has achieved a 16.8% net-of-fees annualized invested capital weighted return on its alternative strategies through September 2007. GLG already runs a similar fund to the Virgin Climate Change Fund, the GLG Environment Fund which has, between January and December 2007, returned 7.02% net of fees compared to the MSCI Europe Index return of 1.62% for the same period.

Like the Virgin Climate Change Fund, the companies in that portfolio are chosen from a performance and then environmental standpoint where no industry is excluded. Companies currently held in the GLG Environment Fund include BG Group, Xstrata and Renault.

The Virgin Climate Change Fund, which opens for business on January 21st and is available through IFAs and direct to the public, will be open to investors with minimum investments of £50 a month or a £500 lump sum.

Virgin Money CEO Jayne-Anne Gadhia said: “We’re delighted to be able to bring GLG’s expertise within reach of all UK investors and deliver a high performance investment fund which is also better for the environment.

The climate change issue is too often seen as one where consumers have to pay a price. There is too much ‘stick’ and not enough ‘carrot’. Our new Climate Change Fund is a straightforward way for investors to put their money into companies at the forefront of changing how businesses operate. And far from having to compromise on investment performance this strategy actually improves it.”

Pierre Lagrange, Co-Founder of GLG and advisor to the Virgin Climate Change Fund with Ben Funnell, said: “Companies which do not adapt to changes in public opinion on environmental impact could see their returns suffer in the future.

“Governments and regulators are likely to increase costs for companies which do not take into account environmental impacts and encourage those that do with subsidies and tax breaks. That creates opportunities for managers such as GLG to invest in high performing greener, cleaner companies and produce strong returns for investors.”

Sir Richard Branson said: “Climate change is an issue which affects us all. Consumers are changing the way they spend and are increasingly looking for more environmentally friendly ways of investing their money too. I’m delighted to be teaming up with GLG Partners in offering the Virgin Climate Change Fund and look forward to delivering our investors excellent performance without it costing the Earth.”

At least 75 per cent of the fund will be invested in an environmentally-filtered basket of European shares – only companies who have a better than average environmental footprint for their sector will be selected.

Up to another 15 per cent will be invested into Solution Adopters which are companies adopting environmental best practice and up to a further 10 per cent will be invested in Solution Providers which are firms specialising in offering solutions to environmental problems.

There are no initial charges, a 1.75 per cent annual management charge and a 20% performance bonus.

In order to earn a performance bonus the fund has to outperform two benchmarks. First the fund has to deliver a greater return than the Bank of England base rate. Plus the fund must also exceed something known as the High Water Mark which is the previous highest unit price reset on a rolling six monthly basis. If the fund fails to beat the High Water Mark or the Bank of England base rate the performance fee is not paid.

The Climate Change Fund will be available within Virgin Money unit trusts, ISAs and PEPs.