ESG Investing is here to stay. This is being driven firstly by a raft of new regulations and legislation coming from the EU around responsible investing, ensuring that investment managers consider carefully the ESG credentials of the assets in which they invest.
However, it is equally driven by consumer sentiment. Investors are increasingly seeking to align their financial goals with their values and contribute to a more sustainable future. This demand has prompted the development of a wide range of investment options that prioritise environmental, social, and governance (ESG) factors.
The environmental dimension focuses on investments that support climate action, renewable energy, resource efficiency, and conservation. Investments in this area aim to reduce carbon emissions, promote clean technologies, and protect natural resources. Social sustainability emphasises investments that promote human rights, working conditions, diversity and inclusion, and community development. Investments may target healthcare, education, affordable housing, and poverty alleviation. Lastly, governance relates to investments that prioritise ethical leadership, transparent corporate practices, and accountability.
To invest according to your own sustainability preferences, you have various strategies at your disposal. One approach is divestment, where you avoid investments in certain sectors or companies that don't align with your values. For instance, if you're concerned about fossil fuel usage, you may choose investments that avoid oil and gas companies. Divestment is a powerful way to send a message to industries and encourage them to transition towards more sustainable practices.
Another strategy is engagement, which involves actively participating in the decision-making processes of companies. This is very common among institutional funds that hold large shareholdings, but is also available to some extent to all shareholders. As a shareholder, you can attend the company’s AGM and engage with management to advocate for sustainable changes within the company's operations. By using your influence, you can encourage companies to adopt better ESG practices, reduce their environmental impact, and improve social outcomes.
ESG-focused funds incorporate environmental, social, and governance factors into their investment decision-making process. These funds evaluate companies based on their sustainability performance, considering metrics like carbon footprint, working practices, and board diversity. ESG-focused funds enable investors to align their portfolios with their values, while also looking to achieve their financial goals. Fortunately, the market offers a variety of investment options that cater to different sustainability criteria.
To find suitable investment products, the best place to start is by assessing your own sustainability preferences. Consider the environmental, social, and governance (ESG) factors that matter most to you. Do you prioritise environmental issues like climate change and renewable energy? Or are social factors like human rights and community development your primary focus? Perhaps you place great importance on strong corporate governance practices. Understanding your preferences will help you narrow down the search for the most appropriate investment products for you.
Once you have a clear idea of your sustainability preferences, then talk to us. We will provide valuable guidance and help you navigate the complex landscape of sustainable investment products and will help you select the products and funds that align best with your preferences.
By thoroughly researching the options available, we can ensure that your investments are in line with your sustainability values. Taking an active approach to sustainability-related aspects of your investments demonstrates your commitment to making a positive impact, while all the time seeking the required financial returns.
In summary, sustainable investments require a thoughtful approach. Begin by identifying your sustainability preferences, before seeking our guidance to gain a deeper understanding of the sustainability-related aspects of investment products. We’ll then take the time to research the sustainability attributes of potential investment products to ensure that your current and future investments meet your personal sustainability preferences.
The result? You are investing for a financial return exactly as you always would, but now you are also investing in line with your values.