Mak­ing the world a bet­ter place

Berkshire Life - - MONEY IN MIND -

On a scale of 1 to 10, how wor­ried are you about cli­mate change?

I think that the mo­men­tum that was build­ing to­wards recog­nis­ing and act­ing upon this global threat to our very ex­is­tence is less likely to be on the front pages and in the head­lines of late. The me­dia has fo­cused their re­cent ef­forts on re­port­ing what ap­pear to be the more im­me­di­ate is­sues be­fore us. The ob­vi­ous tragedy that is the COVID-19 pan­demic, the loom­ing exit from the EU, global trade ten­sions and in­vest­ment mar­ket volatil­ity all ap­pear to be more read­ily re­ported upon. Per­haps this is be­cause it’s eas­ier to do so rather than con­front the big­gest ex­is­ten­tial cri­sis that con­tin­ues to stare us in the face.

Most of us have made and con­tinue to make life­style choices to do our bit. It’s laud­able to in­flu­ence what it is we can each im­me­di­ately con­trol in our own daily lives. Eat­ing less meat, us­ing less plas­tic, be­ing more con­scious of our use of fos­sil fu­els, re­cy­cling prop­erly. All of these mi­cro choices do have a pos­i­tive col­lec­tive im­pact, but ar­guably it is change within the cor­po­rate world that will have a more sub­stan­tial and ben­e­fi­cial im­pact in cap­ping and, per­haps ide­al­is­ti­cally, re­vers­ing the dam­age done.

As a pri­vate in­vestor, how much in­flu­ence can you have in chang­ing the be­hav­iours of na­tional and multi­na­tional cor­po­ra­tions and how easy is it to make a dif­fer­ence? You would be sur­prised.

Struc­tur­ing your per­sonal in­vest­ments to fo­cus on pos­i­tive en­vi­ron­men­tal im­pact is noth­ing ter­ri­bly new. It’s been called many things over the years: Eth­i­cal, Green, Sus­tain­able in­vest­ing to name but three. It used to be that peo­ple mo­ti­vated by their eth­i­cal con­vic­tions would ac­cept that they would en­joy lower in­vest­ment re­turns and en­dure a greater cost of in­vest­ing than if they fell into line with the main­stream. This is now no longer nec­es­sar­ily the case. In­deed, it is rea­son­able to sug­gest that in­vest­ing in or­der to do en­vi­ron­men­tal, so­ci­etal and cor­po­rate good via in­still­ing cor­rect gov­er­nance (or ES&G as is the cur­rent nomen­cla­ture) has be­come the main­stream. While ac­cept­ing that noth­ing can be guar­an­teed when in­vest­ing, it’s now ra­tio­nal to opine that greater prof­its, div­i­dends and so in­vest­ment re­turns are more likely to be en­joyed by ac­tively struc­tur­ing your port­fo­lio to­wards an ES&G ap­proach than not.

Fo­cus­ing your in­vest­ments on cli­mate change is the most im­me­di­ate, al­beit broad-brush ap­proach, to in­vest­ing with a con­science and hav­ing im­pact. We can drill down into more depth and specifics if you are mo­ti­vated to do so. Re­duc­ing poverty, pro­vid­ing clean wa­ter and san­i­ta­tion, in­creas­ing health pro­vi­sion, the avail­abil­ity of in­oc­u­la­tions, im­prov­ing ed­u­ca­tion stan­dards, es­pe­cially for young women, are all vi­tally im­por­tant ar­eas to fo­cus on for our col­lec­tive good. Vig­or­ously in­vest­ing in such busi­nesses is pos­si­ble as is avoid­ing sec­tors that just don’t sit well with your con­science – arms, to­bacco and al­co­hol man­u­fac­ture and dis­tri­bu­tion be­ing typ­i­cally com­mon.

With pro­fes­sional ad­vice and thought, it’s rel­a­tively straight­for­ward to pur­sue such an ap­proach to­wards in­vest­ing. In last month’s col­umn I shared the recog­nised process de­ployed when look­ing to cre­ate the right port­fo­lio to aim to pro­duce the right in­vest­ment re­turns to fund your fu­ture life. Plac­ing an ES&G fil­ter over the choice of the un­der­ly­ing in­vest­ment funds used in pop­u­lat­ing the

As­set Al­lo­ca­tion re­quires a rig­or­ous, dis­ci­plined and struc­tured ap­proach but one that is straight­for­ward to ad­here to once de­signed and im­ple­mented.

Per­haps it is hu­man na­ture to fo­cus on short-ter­mism, to deal with what’s im­me­di­ately in front of us rather than take a step back and re­flect upon what we need to be fo­cus­ing our en­er­gies on. To do so, though, is bury­ing our clichéd heads in in­creas­ingly warm­ing sands. We can each have a swift and sub­stan­tial im­pact upon how com­pa­nies be­have and how it is they go about mak­ing their prof­its; if we all struc­ture our per­sonal in­vest­ments to­wards es­chew­ing the worst cor­po­rate en­vi­ron­men­tal pol­luters in favour of more pro­gres­sive or­gan­i­sa­tions, the in­vest­ment mar­kets will take care of the com­pany val­u­a­tions for bet­ter or worse. Fun­da­men­tally though, not only will we be hav­ing a hugely pos­i­tive en­vi­ron­men­tal and so­cial im­pact but, ar­guably, the long-term in­vest­ment re­turns that we each ex­pe­ri­ence on our port­fo­lios should re­ward our ac­tions of con­science.

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ABOVE: In­vest in the pro­tec­tion of the en­vi­ron­ment

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