Climate change funds continue to outperform conventional peers

Climate change funds are "consistently" outperforming the rest of the market, according to a new report from ethical finance advisory firm Holden & Partners.

The company's Annual Guide to Climate Change Investment assessed the top performing climate change related investment funds operating in the clean energy water, agriculture, forestry and ethical investment sectors and found that despite some volatility in the past 18 months they were broadly outperforming conventional funds.

Citing figures from FTSE showing that its Environmental Opportunities indices have substantially outperformed the all cap index over the past five years, the report showed that climate change related investment funds were benefiting from the strong performance of low carbon businesses.

The report also revealed that climate change related funds have outperformed the MSCI world index over two and three years, with some funds, including Schroders Global Climate Change and F&C Climate Opportunities, also outperforming the market over one year.

"There is a perception that clean tech investment is high risk and focused on small start ups that will either make it big or go out of business," report author Mark Hoskin told BusinessGreen.com. "But they tend to be heavy industrial companies that have substantial market caps – these investments are lower risk than people expect and we are seeing them outperform the market."

That is not to suggest that climate change funds represent a 100 per cent safe investment, and Hoskin was quick to point out that clean energy funds in particularly have suffered considerable volatility over the past year as a result of the global recession. But he added that even clean energy firms were now looking undervalued and well positioned for recovery, while less high profile sectors such as water and agriculture have performed relatively well throughout the recession.

"These funds are consistently outperforming the market," he said. "All the regulatory and political drivers are working in their favour while they don't face the same risks the traditional energy investments face."