New Global Green Fund Uses Only Positive Environmental Criteria

New Global Green Fund Uses Only Positive Environmental Criteria

Boston-based Winslow Management Company and the socially responsible investing (SRI) team at London-based Jupiter Investment Management are joining forces to launch the Jupiter Green Investment Trust, a global fund that breaks new ground in several ways. First, such a cross-continent collaboration itself is novel, with Winslow managing North American assets (30% of the portfolio) and Jupiter managing the remaining 70% of the portfolio invested in companies in the rest of the world. And second, the investment trust focuses exclusively on positive criteria in six environmental themes (clean energy, green transport, environmental services, sustainable living, waste management, and water management), without employing negative or best-in-class screening.

"Nobody has been able to provide me with an example of this kind of collaboration -- certainly within the SRI field it is unique, and in the mainstream field, it is quite unusual," said Emma Howard Boyd, head of Jupiter's SRI and governance team.

"We haven't seen anything like it before, but it's hard to say why -- it seems like such a logical way to manage money by using people in their local markets for their expertise," added Matt Patsky, portfolio manager for the top-performing Winslow Green Growth Fund (WGGFX), who is handling management for Winslow's portion of the investment trust.

Charlie Thomas, portfolio manager for the Jupiter Ecology Fund (also a top performer and also a user of the six green themes), is managing Jupiter's portion. Thomas also managed the legacy portfolio, the Jupiter Global Green Investment Trust, which served as the point of connection between Winslow and Jupiter.

"We've had a long and close working relationship with Winslow since 1990, when Winslow founder Jack Robinson joined the board of one of our other investment trusts," Ms. Boyd told "The Jupiter Green Investment Trust is a rollover vehicle for the Jupiter Global Green Investment Trust, whose life came to an end in May, and it was through restructuring that fund that we decided to launch a new vehicle that moved the investment criteria themes along."

One of the largest holdings in the Jupiter Global Green Investment Trust was the Winslow Green Growth Fund, illustrating Jupiter's confidence in the Winslow style. The new investment trust will not hold the Winslow Green Growth Fund because it employs some negative screens, which the new fund moves away from completely.

"Instead of screening companies out for what they're doing negatively, we're screening companies in for what they're doing positively," Patsky said, pointing out that this obviates the need for shareholder activism. "We believe this is where the SRI world should be moving -- we are beyond the point of lacking companies that pass our screens, so we should now be looking at picking the best opportunities with the best solutions, focusing on performance."

"The fact that we're not screening out anything creates some interesting questions, such as, 'do you have a screen against nuclear?' and the answer is, 'no,'" Patsky said. "If we were to find an incredible advance in the treatment of nuclear waste, it might create an opportunity that we would consider investing in -- but we are not likely to get into anything that is producing nuclear power because of our small- and mid-cap nature."

The Jupiter Green Investment Trust similarly has a bias toward small- and mid-cap pure plays focused on environmental solutions, though it does not preclude holding large-cap companies that are leaders in the green space.

Ms. Boyd points out that the Henderson Industries of the Future Fund similarly focuses on positive sustainability themes (ten as opposed to Jupiter's six), though it additionally employs negative screens. Closer comparisons would be the Merrill Lynch New Energy Technology Fund (MNE) and the Impax Environmental Markets Fund (IEM), both investment trusts like the Jupiter product, but unlike the Jupiter fund with its six green themes, Merrill Lynch focuses on just one (clean energy) and Impax on three (clean energy, water, and waste.)

Investment trusts differ from mutual funds in that they trade like companies on stock exchanges and are closed-ended, meaning they only issue a set blocks of shares, whereas mutual funds take on investors on an on-going basis. The Jupiter Green Investment Trust recently launched on the London Stock Exchange.

"Investors are already in the money, with the average investor up now between 3% and 4% -- not a bad return for two days, especially since the markets have been in a tailspin," said Patsky. "This demonstrates investor confidence in the themes we've laid out."

Jupiter and Winslow both have a very strong track record performance-wise. The Jupiter Ecology Fund has generated one-year returns of 27.8% as of June 9 to rank in the top 15% of its global equity small/mid-cap category, according to Morningstar. Its three-year annualized returns of 22.8% placed it in the top 30%.

The Winslow Green Growth Fund has generated 38.56% one-year returns and 26.72% three-year annualized returns as of May 31 to rank in the first percentile in its category during both time periods, according to Thomson Financial Network. The Wall Street Journal listed it as the number one small-cap growth fund in America on a one-year return basis as of March 31, April 30, and May 31, based on data from Lipper.

While the fund is offered in the U.K. market, Patsky points out that Winslow was already fielding inquiries from its investors based in the U.S. about creating a global green fund.

"The Jupiter Green Investment Trust isn't our solution to meeting that need -- we are working on something else that's U.S.-based, because we think there's an opportunity in the U.S. market," Patsky said.