EBI Earth
EBI has a diverse range of sustainable investment solutions, each one aiming to improve the world through incorporating environmental, social, and governance concerns into their investment decisions.

What is ESG investing?

ESG investing is an investment strategy that seeks both financial return and positive social change

The growth of ESG (environmental, social and governance) investing began in January 2004 when former UN Secretary General Kofi Annan wrote to over 50 CEOs of major financial institutions, inviting them to participate in a joint initiative under the auspices of the UN Global Compact and with the support of the International Finance Corporation (IFC) and the Swiss Government. The goal of the initiative was to find ways to integrate ESG into capital markets. A year later this initiative produced a report entitled “Who Cares Wins”, with Ivo Knoepfel as the author. The report made the case that embedding environmental, social and governance factors in capital markets makes good business sense and leads to more sustainable markets and better outcomes for societies.

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A short history of ESG

The first publicly available ethical fund was the Pax World Fund set up in 1971 in the US by two members of the United Methodist Church. Shortly after, in 1973, the investment arm of the Methodist Church in the UK put forward a proposal for the first UK ethical investment trust. By the end of the 1970s, ethical investment, underpinned by certain religious groups’ ethics, had become part of the investment landscape.

Through the mid to late twentieth century, two dominant themes started to emerge: concern about the effects of inequality in society and concern about the environmental effects of human activity. Environmental concerns took to the main stage in 1972 when the United Nations Environment Program was established. This was the precursor to several United Nations environmental initiatives, culminating in the 1997 Kyoto Protocol, which committed signatories to reducing greenhouse gas emissions. This was followed by the 2015 Paris Agreement, which set the target of global warming to no more than 2 degrees Celsius above pre-industrial levels.

Data source: FTSE Russel, 2019. * Opimas, 2019
Data source: Morningstar, 2018
Data source: GSI Alliance, 2018
Data source: BCG & Greenbiz, 2018
Data source: GSI Alliance, 2018

What does ESG cover?

The three pillars of ESG cover a wide range of issues.
The following table summarises the main areas covered by each pillar.

Environmental Social Governmental
Environmental Social Governance
Climate change and emissions Gender and diversity Board composition
Air and water pollution Human rights Executive compensation
Energy efficiency Labour standards Audit committee structure
Waste management Employee engagement Bribery and corruption
Water scarcity Customer satisfaction Lobbying activities
Biodiversity and deforestation Community relations Political contribution

Environmental issues cover how companies interact with the environment, Social issues cover companies’ conduct towards their internal and external communities, and Governance issues cover how companies behave in their business activities. All three pillars combine to define what most people would categorise as good business practice.

ESG Screening

ESG investing can take several forms and, broadly speaking, these can be categorised into how diversified the resulting investment is:

  • Impact Investing: The most concentrated approach, this style usually takes the form of being goal-driven, for example investments in social housing projects to alleviate homelessness.

  • Inclusion-based: Here the approach is to identify companies that exceed a pre-determined level in one or more of the ESG categories. Companies that pass the screening criteria are eligible for investment.

  • Exclusion-based: As the name implies, this approach screens a universe of potential investments and seeks to exclude those companies that fail to reach certain minimum criteria in their ESG measurements.

  • ESG integration: The most diversified approach, this method seeks to integrate ESG concerns into a predefined investment strategy. There may be some companies that fail to qualify but the aim is to preserve the risk and return characteristics of the investment while taking ESG issues into account.

Approaches to ESG

Esg characteristics

What is screened out?

Each fund manager and index provider have their interpretation of what should be excluded when constructing ESG funds and benchmarks, with varying levels of scrutiny.

Studies show that ESG improves performance

It's a common misconception that for a portfolio to be ethical, you must sacrifice return, however, a variety of research has shown that it's not principles over performance.

Introducing Earth Portfolios by EBI Earth

Our ESG Journey

At EBI we believe that ethical investing is the future, we have carefully crafted a range of portfolios that seek to offer a premium on return while pursuing positive social and environmental change, founded on academic research.

EBI has been monitoring the ESG fund universe for several years, awaiting suitable funds to satisfy our evidence-based approach and engaging with fund providers to develop and launch a range of ESG funds.

In early 2019 EBI were approached by iShares to introduce their ESG Screened and Enhanced range of funds, which we assimilated into our World portfolios to create the foundation of EBI's Earth portfolios. Shortly after, EBI engaged with Global Sustainable Investments to provide additional factor exposure with ESG screening.

The current Earth portfolios have 46% of the equity element invested in sustainable funds. There are further ESG fund launches on the horizon that EBI will seed and incorporate to further increase the sustainability of the Earth portfolios.

However sustainable investing is never straightforward, with one asset class proving to be particularly difficult: sovereign bonds. Companies act in a world where right and wrong are (for the most part) clearly defined and the investors who provide the capital can exercise their judgement on those companies that act in a negative way. Approaches to issues such as corruption, pollution and human rights vary from country to country, with some exceeding internationally set standards and others falling below it. It’s far more difficult for the capital providers to intervene and change the behaviour of sovereign nations and EBI has yet to find a suitable ESG bond fund to replace the current bond element, but EBI will continue to monitor the bond fund universe.

Our Portfolios

EBI are proud to offer a range of ESG integrated portfolios to suit your risk capacity, with a Discretionary Investment Management fee of 0.12%.
Our portfolios' ESG-scores are a weighted average of the ESG scores available from Morningstar, and are applied to the equity proportion of the portfolio only.

ESG-Score: 49
OCF: 0.32%
ESG-Score: 49
OCF: 0.30%
ESG-Score: 49
OCF: 0.28%
ESG-Score: 49
OCF: 0.25%
ESG-Score: 49
OCF: 0.23%
ESG-Score: 49
OCF: 0.21%
ESG-Score: 49
OCF: 0.18%
ESG-Score: 49
OCF: 0.16%
ESG-Score: 49
OCF: 0.13%
ESG-Score: 49
OCF: 0.11%

ESG Scoring

How it's calculated and how well we perform

There are a variety of ESG measures in the fund marketplace, we have found Morningstar to provide the largest and most in-depth coverage and as such we have calculated our ESG scores using their ratings.