Wages of sin: how booze, fags and gambling may be the key to a wealthy retirement | Personal Finance | Finance

There are times when ESG funds may offer superior returns but this isn’t guaranteed.

Dzmitry Lipski, head of funds research at Interactive Investor, recommends the iShares Global Clean Energy ETF but warns the sun will not always shine on the sector.

While the ETF has returned an impressive 125 percent over five years it has plunged 17 percent so far this year.

Lipski warned ESG funds may not work for those who want to generate income. “They have low weightings to the energy and industrials sectors, which are good sectors for dividends.”

Juliet Schooling Latter, research director at FundCalibre, tips JPM Climate Change Solutions, that invests in companies involved in sustainable construction, transport and energy. Launched in June 2021, it has fallen six percent over the last year.

Laith Khalaf, head of investment analysis at AJ Bell, said those interested in ESG can reduce risk by diversifying across a broad-based global fund and tips Liontrust Sustainable Future Global Growth. 

This has returned 50 percent over five years, but is down seven percent over the last 12 months. So is this another case of “go woke, go broke”?

ESG sceptics may be tempted by the BAD ETF whose top holdings include casino operators Caesars Entertainment, Las Vegas Sands and Diageo.

Performance has been mixed. While it is up 16.99 percent over the last six months, over one year it has fallen 8.52 percent.

The VICE ETF’s top holdings including British American Tobacco, champagne and luxury goods conglomerate LVMH, Pernod Ricard and The Boyd Gaming Corporation. It is up just 6.95 percent over five years and has fallen 1.52 percent over the last 12 months.

It isn’t easy being green but clearly the wages of sin aren’t that reliable either. Interactive Investor’s head of investment Victoria Scholar reckons: “It’s better to take a balanced approach.”

Instead of getting dragged into a woke investing war, investors’ priority should be to build a sustainable pot of money for their retirement. Even if it means mixing the bad with the good.