INVESTING FOR GOOD – THE LOW DOWN

Investors are increasingly choosing to put their money into companies that seek to make the world a better place.  

Over half of advised UK adults surveyed now want to move into ESG investing, according to a new study by insurer Prudential^[1]

“ESG investing” is where the focus is on backing companies with strong credentials when it comes to environmental, social and governance (ESG) matters. 

There are businesses all over the world that are dedicated to the environment by developing cleaner energy, sustainable transport as well as reducing plastic waste. 

Under the “social” part of ESG, the focus is on a company’s treatment of staff and suppliers, and to what extent it upholds labour and human rights. 

Governance relates to issues include ensuring fair leadership of the business, matters of executive pay and its stance on shareholder rights. 

In 2020, the amount of money invested in funds which aim to be responsible in these areas trebled year on year from £3.2 billion in 2019 to £10 billion, according to The Investment Association^[2]

The Prudential study would suggest that these figures could grow substantially again this year, with 61% of respondents (who have a financial adviser to handle their investments) saying they care more about the environment and the planet than they did before the pandemic. 

While these numbers are encouraging, 36% admit they actually have no idea what their current investments – including pensions – are invested in.

While having a financial adviser means that investors don’t need to worry too much about understanding the finer intricacies of global stock markets, ESG is becoming a worthy talking point – perhaps the new dinner party topic.

At Tavistock our ACUMEN protection portfolio offers a one-size-fits all ESG policy which looks into seeking maximise risk adjusted returns, whilst prioritising investments that exhibit strong quantitatively verifiable ESG characteristics.

Of course, this is not all about our own moral compasses and desire to help improve our world.

Investing for good is also rewarding from a returns point of view.

The FTSE4Good index of ethical stocks has beaten the FTSE 100 index of leading UK stocks over one, three, five and ten years. Globally, the MSCI World SRI Index for socially responsible funds has beaten the MSCI World Index over three and five years[3].

When it comes to choosing your investments, rather than selecting the individual companies in which to invest, you can use funds that are dedicated to ESG investing.

There are broad funds that look to cover a wide range of issues, and more targeted funds that may look just to seek opportunities within one theme. For example, investing only in companies that are tackling climate change by contributing to the decarbonisation of the world economy.

Ready to explore ESG investing further?

Your adviser can talk you through the options for investing in ESG funds for your ISA or pension. There are plenty to choose from with more and more funds being launched each month.

Together you can find the investments that are seeking to improve areas you feel passionate about.

Source

[1] https://www.mandgplc.com/~/media/Files/M/MandG-Plc/documents/prudential/02-06-2021-Covid-increases-desire-for-sustainable-investing.pdf 

[2] The Investment Association: https://www.theia.org/media/press-releases/ps52bn-inflows-active-funds-december-second-highest-inflows-record

[3] https://www.fefundinfo.com/en-gb/news/esg-investors-setting-the-pace-for-change