Celebrating 5 years of MyFolio Enhanced ESG

Many were looking for a balanced approach, something that embraced environmental, social and governance (ESG) principles, yet still offered broad diversification and competitive returns.

Sustainability with simplicity?

The aim of the MyFolio Enhanced ESG range is simple: to meet demand from pragmatic investors who care about sustainability but also value flexibility and practical portfolio construction. The concept was straightforward but powerful: deliver long-term growth while embedding ESG principles into the investment process. That conviction shaped our approach: five risk-targeted funds, built on the tried-and-tested MyFolio framework that had already been successful for a decade. Each fund is designed to target a specific level of global equity volatility, and all are underpinned by sustainability characteristics that really matter.

Performance: leading the pack

Fast forward five years from inception, and the results speak for themselves. The Enhanced ESG range hasn’t just delivered on its promise, it’s become a robust performer among peers targeting similar volatility levels even in the non-ESG peer groups. Our highest-risk fund, MyFolio Enhanced ESG V, has achieved cumulative returns of over 45.5% since launch, while the most cautious fund, MyFolio Enhanced ESG I, has delivered 9.4% since launch(1). To see full details of MyFolio Enhanced ESG performance along with key risks for the funds, visit our MyFolio Lookthrough reports page.

Since April, Enhanced ESG V has been one of the strongest performers in the MyFolio suite, thanks to a strategic overweight to Asia and Emerging Markets – regions that have benefited from tech-driven rebounds and supportive macro trends. Coupled with innovative themes like sustainable materials, through holdings such as RobecoSAM Smart Materials, these exposures have been key drivers of performance and highlight how our approach can capture both cyclical recovery and long-term structural growth.

Structure and process: active thinking meets ESG

Like all MyFolio funds, the Strategic Asset Allocation (SAA) process is the foundation of return. It’s what gives our portfolios their risk-targeted structure and ensures consistency over time. We start by defining allocations across asset classes based on modelling of long-term expected returns, volatility, and correlations. This disciplined framework underpins every decision we make and is central to delivering risk-targeted outcomes for clients. 

Importantly, our SAA process integrates climate scenario analysis. We assess how different climate pathways, such as accelerated transition or delayed policy action, could impact long-term expected returns across asset classes. These insights help us adjust assumptions and stress-test portfolios against potential climate-related risks and opportunities. By integrating climate scenarios into our SAA process, we ensure that sustainability is a consideration when constructing portfolios.

On top of this robust SAA foundation, the Enhanced ESG range adds an extra dimension through active management and sustainability integration. We combine active, enhanced passive, and passive strategies to capture opportunities for value creation, while ensuring strong ESG credentials across all risk levels. For example, risk levels III, IV and V allocate at least 70% of their portfolios to funds with explicit sustainability objectives, while risk I and II maintain meaningful commitments at 50% and 60% respectively.

But we don’t stop at simple screening or exclusions. We actively engage with fund managers to encourage them to have strong stewardship and ESG integration practices of their own and hold them accountable for what is held in their portfolios. Our ESG approach can be seen in our stewardship and voting practices, our manager selection process and ongoing monitoring and assessment.

A milestone for transparency and trust

One of the most exciting developments for the Enhanced ESG range has been achieving compliance under the FCA’s Sustainability Disclosure Requirements (SDR). In November 2024, we were among the first multi-asset fund of fund ranges to meet the SDR framework, which came into effect to raise the bar on transparency and reduce greenwashing in sustainable investing.

This achievement matters because SDR introduces strict rules on naming, marketing, and disclosure for funds with sustainability characteristics. By aligning with SDR, we’ve demonstrated that our Enhanced ESG range meets robust standards for clarity and integrity, giving clients confidence that what we say about sustainability is backed by evidence. It’s another way we’re responding to investor feedback and building trust through transparency.

From December 2024, our funds were renamed to reflect their SDR status as “unlabelled with sustainability characteristics” and we’ve embedded SDR-aligned reporting across the range. This step gets us closer to the ultimate goal: clear, consistent, and credible sustainability information for investors, helping them make informed choices in a market that’s often clouded by jargon and ambiguity.

Looking ahead: investing in tomorrow’s themes

The next chapter for Enhanced ESG is about capturing future growth themes. We’re already allocating to some of the most exciting strategies shaping the low-carbon economy. Like Robeco Smart Materials, which focuses on advanced materials and smart manufacturing—critical for resource efficiency and circularity. Or Ninety-One Global Environment, a high-conviction strategy investing in companies driving decarbonisation and electrification. And then there’s Pictet Global Environmental Opportunities, targeting businesses that provide solutions to global environmental challenges, from water scarcity to pollution control. These are not just investments; they’re commitments to the structural trends that will define the next decade.

The journey continues

Five years in, we believe the Enhanced ESG range has demonstrated that sustainability and performance potential can go hand- in- hand. We’ve built a range that resonates with clients and targets robust returns, while contributing to a better future. And we’re not stopping here. In our view, the opportunities ahead are strong and improving, and we’re ready to seize them. Here’s to the next five years of investing with purpose.