Diederik Basch, senior equity analyst consumer staples, retailing, durables and apparel, RobecoSAM

Healthy living companies

RobecoSAM's Sustainable Healthy Living Strategy aims to take advantage of the growth potential in the healthy living sector by identifying and investing in companies that are addressing the growing health concerns of today. Increasing calorie intake in all regions of the world is a key driver behind the growing prevalence of obesity-related chronic diseases.

In addition, healthcare costs around the world are rising as a percentage of gross domestic product (GDP). These costs are to a large extent generated by chronic diseases that are linked to a sedentary lifestyle. A healthier lifestyle, active prevention and earlier diagnoses would in many cases be the cheapest solution to the long-term healthcare challenges.

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As a result, companies focused on offering healthier foods, activity trackers or health management aids such as glucose monitoring devices can benefit from growing demand.

Bryn Jones, manager, Rathbone Ethical Bond fund

Charity bonds

Few managers invest in charity bonds, but we think they are great socially responsible assets to own. Some investors believe these types of bonds must be less likely to repay debts than companies; however, in reality, charities tapping the bond markets are usually extremely light on debt.

These bonds, mostly low duration due to their higher coupons and short maturities, are usually relatively small issues of a few million pounds. It's a perfect example of our positive ethical screening process (as opposed to our negative one that culls carbon emitters and cluster bombs).

For just a small amount of cash, relative to our £317.5m portfolio, the investment gives a large boost to a charity's work. We bought £100,000 of three-year bonds for Scope, a UK disability charity, so it could fund a shop roll out that gives it a regular long-term income.

The bonds have since matured, offering us a decent, low-volatility return, and Britons with disabilities a brighter future.

Paul Schofield, global equities portfolio manager, Allianz GI 

'Shared' economies

I have spent plenty of time trying to find ideas exposed to the ‘sharing economy’. 

As long as the average consumer demands the latest phone, car or ‘exotic’ foreign foods, the demand for energy to make, deliver, or power these products mean the supply of fossil fuels will continue until a credible alternative can be found.

But why do we not encourage society to move away from ownership? To share a car, for example, and enjoy the same benefit of usage without the burden of storage or maintenance. 

With the power of the internet, the sharing economy should thrive. 

These disruptive businesses are not particularly new, but are starting to move into the mainstream and interesting investment ideas are beginning to emerge. 

Seb Beloe, head of research, WHEB Listed Equity  

Semi-conductors

Semi-conductors are not typically seen as a core holding for sustainable investment funds, but two trends are likely to change this. 

The first is the increasing deployment of the ‘internet of things’. Affecting almost every type of business from finance to farming, there will be substantial resource efficiency benefits delivered by the build-out of smarter networks of products and services the internet of things enables. 

The second trend is around the electrification of the automotive sector.

The Volkswagen debacle is helping to accelerate the shift towards hybrid and full-electric vehicles. The semi-conductor foundation on which both of these trends are based means this sector will become an increasingly important part of the sustainable investing universe. 

Chris Wright, manager, Premier Ethical fund

The People’s Operator

We own about 1% of a company called The People’s Operator (TPO). TPO was founded in 2012 and offers pay monthly or pay as you go mobile contracts. 

These contracts are competitively priced and allow users to direct 10% of their monthly bill to a good cause of their choice, at no cost to themselves. Also, the TPO Foundation, a UK registered charity receives 25% of TPO’s UK trading profits and it distributes those to charities which aim to make a positive difference to people’s lives.

By offering similar prices to other mobile operators, but the additional ethical carrot of systematic charitable giving, we expect TPO to become a major mobile operator both here and in the US.   

Catherine Ryan, portfolio manager – environmental strategies, Kleinwort Benson Investors

Water

When most investors think about ethical investments, Indian companies are probably not the first to come to mind, and neither might companies involved in water treatment.

But water is, without question, the world’s most essential resource. Without clean water life is impossible, still less agricultural or economic development.

A portfolio of water stocks presents an interesting investment opportunity as well as an opportunity to help increase the supply of water and reduce water wastage and pollution. Water companies are playing a significant role in a rapidly developing world.  

Dylan Ball, portfolio manager, Templeton Growth fund

China/solar

While China is not often associated with environmentally responsible investing, the fact remains 30% of the world’s demand for renewable energy comes from China. 

The cost of solar power installations is falling at a rate of more than 15% a year. But with lower commodity prices and high subsidy costs, countries like Japan, the UK, and potentially the US in 2017, are revisiting their renewable energy policies. 

The Chinese government recently upped its solar targets by 15% and is looking to install 150GW of solar by 2020, equivalent to three times Germany’s entire installed base. 

We are looking to benefit from this by investing in a company called GCL Poly which manufactures over 65% of China’s polysilicon wafers, the key component to a solar panel.  

Guillaume Bonnel, impact investing adviser, Lombard Odier IM

Unlisted SRI

It is highly unusual to invest in unlisted asset classes. Impact investing is an approach that aims to achieve social or environmental objectives, typically financing growth and venture stage companies through private equity or private debt instruments. 

This $100bn industry, a fraction of global financial assets, empowers the poorest populations by financing companies that provide them with access to nutrition, health, loans, education; or that protect the environment.

By directing capital towards unlisted asset classes, where it is really needed, impact investing instruments go well beyond traditional ethical funds in terms of positive societal outcomes. They may also avoid the next free fall of global stock exchanges.  

Neville White, head of SRI, policy and research, EdenTree IM

Shipping/climate change

Shipping’s contribution to climate change has been overlooked – it is the only sector without a cap on emissions at EU level and accounts for around 3% of global GHG emissions. 

Since 1990, shipping emissions have increased by 90%. Newly commissioned ships are regulated to become more energy efficient - design improvements include modifying hull, propeller and propulsion systems and ‘slow steaming’. 

Shipping not only lies at the very heart of global trade, with up to 90% of cargo by volume traded by sea, but also provides investors with an impressively wide and deep investment value chain. 

Harry Darke, investment manager, Architas  

John Laing

John Laing Environmental Assets Group is a diverse portfolio of wind farms, solar firms, biomass plants and waste processing plants that pays an inflation-protected income. 

Renewable energy infrastructure forms a key part of governments’ commitment to reduce carbon emissions.  

There has been some negative sentiment more broadly in the renewable energy sector following George Osborne’s announcement in the Budget that the Climate Change Levy exemption would be scrapped. This news resulted in the share prices of companies exposed to renewables decline.

However, JLEN fared reasonably well, benefitting from its low dependency on subsidy revenues and being diversified across a range of different renewable technologies.

Peter Michaelis, head of sustainable future fund range, Alliance Trust Investments

Green technology

Technology continues to challenge and improve the way we do things, it can facilitate economies to reduce environmental impacts and improve quality of life through innovative solutions such as smart grids, connected homes or e-health.

However, our increasing reliance on digital information means there are now greater risks across a wide range of sectors and users; the threat landscape is changing and becoming more sophisticated.

Companies that provide society with solutions to this challenge fit very well with the Sustainable Future teams' resilience theme.

IT security solutions facilitate a safer digital economy by protecting digital information, preventing cyber-attacks and breaches, ensuring privacy and IP rights and ensuring resilient IT infrastructure to support communications and data networks. We currently invest in Sophos, Check Point Software Technologies and Splunk.

Andy Mason, responsible investment analyst, Standard Life Investments

Companies helping to alleviate poverty

The sustainable development goals aim to end poverty in all its forms by 2030. Extreme poverty has been halved since 1990 but 800 million people, mainly in Africa and Asia, still survive on $1.25 per day.

Investment supporting economic growth is the key eradicator of poverty not philanthropy. The emergence of crowd funding and peer to peer lending could allow individual investors to reduce global poverty.

Before this can be fully implemented, there is a need for investment in telecoms to provide infrastructure and banks to provide financial services such as Vodafone and Barclays' current work in Africa.

The purchasing power parity between developed an undeveloped markets allows individuals to make relatively small investments which create significant changes to those in poverty.

This investment coupled with better communication and financial services has two key impacts. It supports people out of poverty through trade and allows larger players to enter markets, such as Cargill's current mobile payment scheme for small holders in Africa.

Ladislas Smia, deputy-head of responsible investment research, Mirova

Energy

Ethical investment is currently switching from a risk-based to an opportunity-based approach. From this new perspective, Climate-friendly investments remain a considerable source of opportunities as the transition to a low carbon economy gains momentum.

Approaching this issue holistically is one way to identify players providing solutions, not only in renewables, but also in all major energy consuming sectors. Mobility, for instance, is changing profoundly due to the emergence of electric vehicles, while innovations such as light-weighting continue to decrease the energy consumption of thermal vehicles.

In the building industry as well, many companies have adapted their business models to provide technologies which decrease the energy consumption of residential and commercial constructions (e.g. captors and sensors). Quantifying the benefits of these approaches is an effective way to identify companies with high potential.

Karina Funk, co-portfolio manager, Brown Advisory Large-Cap Sustainable Growth strategy

Middleby

We invested in Middleby, a global leader in energy efficient cooking equipment, over three years ago having been attracted to the company's strong fundamentals and, in particular, by their focus on developing products which are instrumental to their customers' energy savings initiatives.

Energy efficiency is an integral part of their product design and the CookTek range operates at less than half the energy cost of competing models. Not only does this outcome have environmental benefits, but it also helps customers make cost savings which can then be reinvested in their business.

The success of these products, like CookTek, combined with a number of key fundamentals, makes the company an extremely attractive value proposition: Middleby has historically grown at double the North American industry average rate of 3% to 4%, which has translated into significant share price gains.

Middleby's innovation driven approach to energy efficiency gives it a structural business advantage, and explains our continued investment in the business.

Simon Howard, chief executive of the UK Sustainable Investment & Finance Association

Crowdfunding

I would say innovative rather than unusual will be usual quite soon. From crowdfunding to clean tech, the responsible investment options in the UK market have never been more diverse, with options for investors of all types.

Retail investors can put as little as £5 into crowdfunding profitable community energy projects through platforms like Abundance and Ethex; there is peer-to-peer lending, and funds like Triodos Renewables – which has shown returns of around 6% and puts money in areas like small-scale hydroelectric power.

Individual investors with larger sums can take advantage of new 'Social Investment Tax Relief' funds. There is a lot of activity in institutions of all types.

Many are investing in green bonds. Some are making impact investments. These are particularly exciting as money is going into everything from care homes to gyms and they report as meticulously on their environmental and social benefits as they do on financial returns.

Anu Narula, head of global equities, Mirabaud Asset Management

Health and wellbeing

Mirabaud is a signatory to UN PRI and in our Global Equity funds we integrate sustainability analysis into the investment process. We look for companies that are better run from the ESG point of view and aiming to get exposure to mega-trends that would give these companies growth rates higher than GDP.

One of the mega-trends that we have identified is health and wellbeing. Urbanisation, better access to food, modern lifestyle leads to increase in obesity and associated problems such as diabetes and cardiovascular problems. This is why global sports market is growing at an above GDP trend.

We considered other sport shoes makers Nike and Asics but today Adidas is our preferred investment. Beyond exposure to fast growing market, adidas is also among industry leaders in the way it tackles the main sustainability issues including supply chain, energy use & emissions and product development.  

Nick Anderson, co-manager, Henderson Global Care Growth fund

Fibre lasers

IPG Photonics is a manufacturer of highly efficient and powerful fibre lasers. These produce an extremely bright and powerful light by combining the high efficiency of semiconductor diodes with the amplification and precise beam characteristics of optical fibres.

Using fibre lasers in applications such as cutting, welding and brazing is 2-3 times more energy efficient than conventional lasers. This is a disruptive technology in the early stages of adoption across the automotive, general manufacturing and electronics industries.

IPG Photonics is the leading global producer of fibre lasers.  The company has invested heavily, growing production capabilities and developing new technologies.  New applications include metal sintering for 3D printing, laser ablation for paint stripping and sapphire cutting for mobile devices.

Guillaume Bonnel, impact investing advisor, Lombard Odier IM

Impact Investing

Of the world's 200 million companies, about 50,000 are listed on a stock exchange. Investors are concentrating their positions on a small part of the global economic fabric. It is highly unusual to invest outside of this narrow universe, in unlisted asset classes.

Impact Investing is an approach that aims to achieve social or environmental objectives,  typically financing growth and venture stage companies through private equity or private debt instruments.

This $100bn industry, a fraction of global financial assets, empowers the poorest populations by financing companies that provide them with access to nutrition, health, loans, education; or that protect the environment.

This goes from providing solar electricity in rural villages to designing affordable nutritive solutions in poor areas.

By directing capital toward unlisted asset classes, where it is really needed, Impact Investing instruments go well beyond traditional ethical funds in terms of positive societal outcomes. They may also avoid the next free fall of global stock exchanges.

James Penny, investment manager, TAM Asset Management

Sustainable property

When it comes to building SRI portfolios we constantly need to question the investment norm. Namely, How socially responsible is the UK property market?

In today's low yielding environment the UK property sector has proven itself a port in the proverbial storm. But how to filter the responsibly minded funds from the alpha driven?

The GRESB 'Global Real Estate Sustainability Benchmark' was the green light for our entry into this sector. The benchmark provides us with a unique insight into the sustainability practices of the UK's property funds.

Funds must conform to a startlingly wide range of sustainability criteria within their property investments from carbon footprints, self-sustaining power sources, tenant interaction and community involvement to name but a few.

We have been working with a select number of funds who have scored highly on this benchmark thus giving TAM the ability to provide our SRI clients with a viable alternative to the fixed income market.

Ryan Smith, head of corporate governance & ethical research, Kames Capital

ARM Holdings

ARM designs semiconductors and silicon chips and then licences this intellectual property, mainly to semiconductor manufacturers. Semiconductors and silicon chips are the foundation of modern electronics

The 'smartest' chips contain a processor which controls both the operation of the chip and the electronic device that the chip goes into. Together they form part of the electronic controllers that manage the many various digital devices that we increasingly rely.

Why should ethical investors view this positively? Firstly, the best chips require the least power – important given the ubiquity of electronic devices.  Secondly, internet connectivity enables improvements to education, health and agricultural productivity in the developed and the developing world.

In healthcare, the benefits range from an individual using Google to find health-related information, through to healthcare professionals gathering information from the population to curb the spread of epidemics.

In agriculture, low-cost sensors and the associated connectivity offer the chance to monitor soil and weather conditions, thereby enabling better planting and irrigation strategies.

Frédéric Samama, deputy global head of institutional & sovereign clients, Amundi

Climate change focus

While a majority of people acknowledge that climate change is a risk for society, institutional investors have only recently awoken to the potential threat to investment returns. But simply allocating capital away from carbon-intensive companies is not necessarily the best way to create value.

This has led to the development of a new generation of decarbonised funds which allow investors to reduce their portfolios' carbon exposure without sacrificing returns.

In the unlikely event of no climate change impact, investment performance will match the benchmark. If climate change does take effect, the investment strategy will generate outperformance.

Indexes are leading the way in this regard, such as the MSCI Low Carbon Leaders indexes, developed by MSCI, aiming to achieve at least a 50% reduction in the level of carbon emissions compared to its parent indexes, while minimizing the tracking error relative to them.

This approach sends a clear message to companies to revise their pollution, which should accelerate the transition towards a low-carbon economy.

Lisa Beauvilain, head of ESG, Impax Asset Management

Ethical asset allocation

Investors seeking to align their savings with their values often choose environmental funds for all or part of their 'ethical' allocation. We are seeing growing interest in investment in environmental solutions and measurement of the net impact which capture a broader range of opportunities than traditional negative screens.

Many asset classes (eg, infrastructure, venture capital and debt) commonly use positive impact metrics. However, listed equity products have been slow to adopt a more sophisticated positive approach and typically focus on negative risks; often with overly simplistic techniques - including carbon foot-printing. Yet methodologies are being developed to calculate net carbon data and other positive environmental impacts.

Investors in environmental strategies can use these additional positive net impact metrics to decarbonise their portfolios or offset high emissions in alternative strategies, while enhancing their understanding of the positive outcomes of investment decisions.

Mike Sell, head of Asian investments, Alquity Investments

Frontier markets – Engro Foods

Frontier markets such as Bangladesh, Pakistan or Vietnam are not generally associated in people's minds with responsible investment opportunities. However, the best companies in these markets are beginning to follow the best practices of developed market companies.

For example, Engro Foods, a Pakistani dairy, who has been gaining market share from Nestle and ‎has very strong future growth prospects, produces data on greenhouse gas emissions, meets international health and safety standards, and has installed waste water treatment plants at its facilities.

As a very different example, BRAC bank in Bangladesh employs engineers to visit the factories that they lend money to, to ensure their structural integrity and to avoid situations such as the Rana Plaza factory collapse.

Frontier countries have been some of the best performing markets during this turbulent year, and responsible investors should consider opportunities here as well as traditional areas such as UK and Europe.