Industries of the Future stocks are not high yielding
Higher yielding equities are generally found in relatively mature industries that have fewer corporate investment opportunities for cashflow and where dividends are seen as an important component of total return. On the other hand, SRI and industry of the future style companies are generally relatively young, developing companies that have significant corporate investment opportunities and are likely to have low dividend payout ratios.
Ethical Screen and changing market make ethical income difficult
When constructing an equity portfolio that already combines industries of the future themes with an income requirement, overlaying negative screening acts to further restrict the investible universe. For UK portfolios, this issue has become more difficult due to the changing shape of the UK market over the last decade.
In 2000, excluded or very contentious industries for SRI screening (e.g. oil and gas, mining, aerospace or tobacco) accounted for just over 25% of income from UK equities. By 2011, with the banking sector providing far less income, these industries had grown to nearly 40% of market income.
Why into Global Care Growth?
It is our view that running the dual conditions of an SRI portfolio with a yield premium makes constructing a well diversified portfolio challenging in a UK market context. In contrast, investing in a well diversified global growth portfolio allows investors to generate strong investment returns from exciting investment themes while also benefiting from strict SRI guidelines.