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04 Mar 20
Do Good, Make Money – How can ESG investment funds make your money work for you?
How would you feel if I told you that your investments were having a negative impact on the environment?
An alarming number of investors do not know where their money is going and whether it’s being used for good; writes Emma Craig, Independent Financial Adviser.
Would you be happy knowing that your money is funding weapons creation, intense farming, and Genetically Modified Organisms (GMO)? Or how about coal and fossil fuels, mining, gambling, or the tobacco industry?
If you knew, would you consider an ethically and socially responsible alternative? Would you invest your wealth into funds that demonstrated measurable social benefits? Would you use the power of your capital towards creating a better world, while still making money?
What are ESG investment funds?
ESG (Environmental, Social, and Corporate Governance) investments come under the older umbrella of ethical investments. They are affordable, clean, and green, sustainable investment funds, aiming to do good in the world.
Why are ESG investment funds important?
For a vast majority of UK investors, it’s vital that their investments reflect their moral compass. Investors piled a hefty £4.4bn into UK ethical investment funds in the first ten months of 2019*. This shows that ESG investments are much more than a trend. There are now more than 80 ethical, sustainable, and green options available in the UK, offering a much-needed diversification.
What are the benefits of ESG investment funds?
Just because you start placing capital into ESG investment funds, does not mean you will see poor return on investment. In fact, it can mean quite the opposite. Data shows** that over the last five years, ESG investment funds have outperformed sector averages. A well-researched approach that seeks to maximise the social impact of a portfolio and minimise harm has been proven to deliver on investors’ financial expectations.
Incorporating ESG factors can improve the risk-return characteristics of an investment portfolio. It can also make it more sustainable, helping you to achieve your investment goals. Good With Money have introduced the ‘Good Eggs Mark’ scheme to help investors to identify the most ethical companies to deal with.
Strong and stable
Well-managed businesses with good ESG integration are less likely to be involved in corporate scandals, reducing the risk of a sudden decline in share price. Did you know that No.1 carmaker Volkswagen share price plunged more than 18% after regulators found some of its cars could manipulate official emissions tests?
Case Study – What My Client Said
My client, John, had recently inherited a large sum of money following his mother’s death. He was clear in his mind that he wanted to invest it in an ethical way. “It was important to me in memory of my parents that the investments were not going to cause harm to anybody or the environment we all live in,” says John.
John contacted me for assistance with the most suitable way to start a pension and invest the rest of the money. “Emma listened to my needs regarding how the money should be used and came back with clear and concise information. This made it easy for me to make the decisions and feel comfortable with how the money that my parents worked hard for was going to be invested”.
For clarity around where your money is invested, speak to an Independent Financial Adviser about your options. They will review your current investments and exposure to dirty industries for a more modern approach. They will help you to consider how ethical and sustainable investing could ensure that you achieve your financial goals and, ultimately, your legacy.
When you speak to your children, will you share how well you invested your money and the good it did for our planet?