Making the world a better place
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