The fintech app ikigai has unveiled its recently redesigned portfolios in line with environmental, social and governance (ESG) criteria.
As identified by MSCI ESG research, ikigai have updated all their portfolios to screen out companies involved in any of the following practices:
- controversial weapons
- nuclear weapons
- civilian firearms
- UN global compact violators
- thermal coal
- oil sands
The update not only removes stocks from harmful and unsustainable business practices, but also makes a significant difference to the portfolios’ carbon footprint, reducing it by up to 27% in comparison to the original portfolios.
The move has no significant impact on the performance of the portfolios based on backtested calculations, while building further resilience for mid and long-term investors.
ESG investing, which has been a rising trend for a few years, has been accentuated by the pandemic, as revealed in a report from Prudential. 61% of respondents reported caring more about the environment and the planet than they did before the pandemic.
According to the same report more than half of UK adults have been prompted to move into sustainable investing during Covid-19, rising to 60% for Millennials, 44% for Gen X, and 35% for Baby Boomers.
Research by PWC has shown that sustainable investments are forecast to reach €7.6 trillion (a three-fold jump) by 2025 across Europe, taking their share of the European fund sector from 15% to 57%.
The new ESG allocation is based on the MSCI research, which rates companies based on their exposure to ESG risks and their ability to manage those risks relative to peers.
Like ikigai’s original wealth offering, the portfolios continue to be fully managed, globally diversified, and span five different risk levels. New customers who wish to invest in one of these portfolios can do so by opening an account and passing the investing profile.
ikigai’s portfolios are designed in collaboration with the global asset manager BlackRock who provides ikigai with insights and asset allocation guidance.
The updated portfolio range will have no impact on the annual fees which stay at 0.75% plus a small fund provider fee (generally ranging between 0.09% to 0.14% per year).
Edgar de Picciotto, the co-founder of ikigai, says: “Sustainable investing is the way forward to build a sustainable future for our society and our planet and through this important change to our portfolios, we are helping our clients improve their financial wellbeing in a way that is more in line with their beliefs.
“This is an exciting move for ikigai and our first step to give our customers the opportunity to invest in line with the causes they’re most passionate about.”
Joe Parkin, Head of Banks and Digital Channels in the UK at BlackRock added: “In today’s market, ESG considerations have become a key element of the investment decision process as UK investors increasingly consider the impact their investments are having. Embedding sustainability into the core of an investment portfolio is enabling more people to transition to sustainable strategies and we are delighted to support ikigai as they update their wealth offering to incorporate ESG criteria as their new standard.”