31 May 22

Sustainable Investments

Impact Investing – the evolution of investments continues…

Written by Kristan Oakley, APFS - Chartered Financial Planner at True Bearing

Most of us find ways of limiting our impact on the environment and doing good - it’s almost second nature these days - using our cars less, recycling, charitable giving, voluntary work, the list of choices we can make is long! It’s rewarding and we should keep doing it! However, the money you hold in pensions and investments can also be a very powerful force for good. 

For many, the true value of their investment is no longer just about returns. In recent years, there has been an exponential increase in the number of investors calling for their money to make a positive impact on society, the environment and the world at large. All without sacrificing the growth potential they need to achieve their financial goals. The investment world is evolving quickly to meet demand, but this inevitably leaves investors struggling to keep up with the concepts, and the jargon!

Accompanying the growing demand is a multitude of funds and strategies that integrate ethical and environmental considerations into the investment process. Today, there are three main styles of investing to fulfil this. There are distinct differences between these styles that will affect how portfolios are structured and which investors need to understand:

• ESG looks at the company's environmental, social, and governance practices, alongside more traditional financial measures.
• Socially Responsible Investing (SRI) involves actively removing or choosing investments based on specific ethical guidelines.
• Impact investing looks to help a business or organisation complete a project or develop a program or do something positive to benefit society.

In simplest terms, ESG through SRI to Impact investing could be described as a spectrum along which the focus shifts progressively toward the investments needing to have a positive impact in a measurable way. For example, an impact investment might be to help a business or organisation accomplish specific goals that are beneficial to society or the environment. In this case, investment returns might not necessarily be the main objective.

At True Bearing, we know that no two investors are the same, and it’s our role to help clients gain a full understanding before investing in this area. If you are interested in discussing more then please feel free to contact us.

The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this article represent those of the author and do not constitute financial advice.