CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Are equity investors really making a difference to planet?

By David Burrows

11:00, 26 November 2021

Solar panels and rainforests
Asset managers are keen to offer climate-friendly funds – Photo: Alamy

The recent COP26 conference highlighted (if it needed highlighting) the urgency for climate action. The call for investment in ESG-focused (environmental, social and corporate governance) companies continues to gain momentum – one of the reasons ESG funds have moved from niche to mainstream in recent years.

But as Andy Merricks, fund manager at 8AM Global points out, the enthusiasm with which the fund management industry has suddenly discovered that it can ‘make a difference’ appears to be closely aligned with the commercial realisation that it risks missing out if it doesn’t have a sustainable offering.

“Virtually every fund manager that talks about their sustainable fund explains that they engage with the management of the companies that they meet with and try to encourage them to run their businesses for the benefit of people or the planet, either through the way they operate or the products and services they provide.”

This is fine and commendable, he argues, but goes on to point out that these same fund management groups invest just as heavily in what would be deemed unsound stocks from an ESG perspective in some of their largest equity funds.

Non-sustainable investment

Merricks took a random selection of fund management groups that offer a sustainable fund and ran a cursory glance over the top 10 holdings in one or more of their UK equity funds.

“Every single one of them had one or more of the following companies in their top 10 lists: BAT, Imperial Brands, Philip Morris, BAE Systems, BP, Royal Dutch Shell, Rio Tinto, Glencore. I’m not an ESG specialist but these are not the types of company that I would expect to make the ESG cut ordinarily.

“To be clear, these companies were not in their sustainable funds but nonetheless it amounts to billions invested across the fund ranges in companies that they would exclude by way of their own screening criteria.”

He suspects their argument is that they are providing choice for investors who want or need a global energy fund or maybe an equity income or Alpha-style fund. “This is absolutely commercially understandable, but it’s probably best not to come across as holier than thou in those funds that are being run for the ‘benefit of people or the planet’.”

What is your sentiment on UK100?

Vote to see Traders sentiment!

Loose ESG screening criteria

How wide a remit sustainable funds have in allowing or disallowing investment into certain companies is another big concern for Merricks.


35,473.20 Price
+0.260% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 2.2


17,005.90 Price
-2.230% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0044%
Overnight fee time 22:00 (UTC)
Spread 30.0


16,043.70 Price
+0.230% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 1.8


16,123.50 Price
+0.770% 1D Chg, %
Long position overnight fee -0.0221%
Short position overnight fee -0.0001%
Overnight fee time 22:00 (UTC)
Spread 1.5

He says too many asset management companies point to thresholds applied to revenues that companies can derive from unsustainable or unethical activities (tobacco, gambling, fossil fuels, intensive farming), which so long as they satisfy, means they qualify for inclusion in a portfolio.

“I may have read this wrong, but it appears to be saying that companies can make money from unsustainable and unethical activities, but not too much. It sounds a bit like telling a burglar that they have to give all the goods back that have been stolen… well, most of them.”

Merricks concludes: “I am all for ESG considerations – which normal person wouldn’t be? It’s just that the new-found enthusiasm for ESG from virtually every fund group that has a fund to sell comes over as a touch disingenuous.”

Sector specialists provide deeper insight  

Rachel Whittaker, head of sustainable investment (SI) research at asset manager Robeco, is concerned that when it comes to ESG investing, fund houses are not viewing specialist analysts as a necessity, when they should be.

“Many of our peers still treat SI research as a support function, but our SI research team contains both sustainability and sectoral specialists. It has become common practice for traditional equity and credit analysts or portfolio managers to say that they integrate ESG, but in practice, no one’s an expert on everything and the idea that one person can know everything they need to know about every sector, every asset class or every ESG topic is unrealistic.”

Whittaker adds that having a team of sustainability and sector specialists allows the time and expertise to gain deep insights into the non-financial issues that are driving the profitability and opportunities of an industry in the future.

David Czupryna, head of ESG development at Candriam, takes a similar line. “Does SI require technical and sector expertise? The answer is yes. That is why at Candriam our ESG analysts are organised by sector and broad ESG thematic. The more complex and technical ESG matters are, the more critical ESG analysts bring the right knowledge. And in terms of environmental challenges, for instance, the technicality of the topics makes such knowledge essential.”

Read more: Can corporates be swayed to care about people and the planet?

Rate this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading