Investing in the Planet
More and more, individual investors are feeling a greater social responsibility and a desire to protect our planet’s resources, they want their investments to do some good rather than focusing on maximising returns. They are choosing to put their money where their beliefs and values are, investing in companies that look to reduce their carbon footprint and seek to invest in companies that are actively contributing to make a better world.
Responsible investing follows a process that may include limiting exposure to controversial industries such as weapons, fossil fuels and tobacco; or it may include investing in areas that are looking to have a positive impact – for instance, clean energy, recycling or clean water provision. When selecting companies to invest in fund managers also set high standards on a range of social and governance matters. Portfolios are put together weighing up environmental, social and governance issues and are known as ESG funds.
There’s no single applicable way to be a responsible investor. What is and isn’t ‘responsible’ varies from investor to investor which is why it is important to discuss with your financial adviser so that your objectives can be tailored to your individual principles. There are different styles to responsible investing from the lightest approach which avoids large ESG offenders without sacrificing financial returns to impact investing which focuses largely on all social and environmental factors in a way that places principles before profit.
Either way deciding to invest responsibly does not mean that you will be left with underperforming funds, on the contrary it could be considered that those companies with more sustainable business practices are better adapted to long term challenges such as climate change and are more unlikely to suffer stock price hits from environmental scandals or fines.
The arena for ESG is growing and with this provides an opportunity for investors to gain value from their funds whilst valuing what is important to them, ensuring businesses consider the impact on our planet to make it more sustainable for future generations.
Please note that past performance is not a reliable indicator of future results. The investor may not get back the amount invested or may be required to pay more.
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