ETH­I­CAL IN­VEST­ING

Destiny - - Money - BY Elzanne Roos

With all the cor­rup­tion and graft mak­ing head­lines daily in our coun­try, you’d be for­given for as­sum­ing there’s no such thing as eth­i­cal in­vest­ing. But is that the case?

In a world where our en­vi­ron­men­tal and so­cial ethics are con­tin­u­ally chal­lenged, many people have be­gun to ques­tion how their pre­cious fi­nan­cial in­vest­ments are be­ing used. While we all want to build wealth and save for re­tire­ment, it’s not al­ways clear whether our hard­earned money’s be­ing used for good by the people to whom we’ve en­trusted it. As con­sumers de­mand to know and de­cide what’s done with their money, there’s been a rise in in­vest­ment op­por­tu­ni­ties that not only make a pos­i­tive im­pact, but of­fer good re­turns. But find­ing these options isn’t easy – par­tic­u­larly for pri­vate in­di­vid­u­als or “re­tail in­vestors”.

BE­WARE OF GREENWASHING

Many fi­nan­cial in­sti­tu­tions use the terms “eth­i­cal”, “re­spon­si­ble” or “sus­tain­able” to de­scribe port­fo­lios which have in­cor­po­rated en­vi­ron­men­tal, so­cial and gov­er­nance (ESG) cri­te­ria into their in­vest­ment screen­ing pro­cesses.

How­ever, long-time an­a­lyst Mike Davies from Kigoda Con­sult­ing warns con­sumers to pay close at­ten­tion to how in­sti­tu­tions ap­ply these ESG prin­ci­ples in prac­tice. Kigoda Con­sult­ing, which spe­cialises in re­search and anal­y­sis is­sues af­fect­ing sus­tain­able in­vest­ment across sub-Sa­ha­ran Africa, has found much ev­i­dence of “greenwashing” in the way funds ap­proach the issue. “Greenwashing nor­mally refers to a com­pany us­ing clever mar­ket­ing tac­tics to show it­self in a favourable en­vi­ron­men­tal light, while ac­tu­ally ig­nor­ing the crux of the problem. So, as with any due dili­gence of in­vest­ment op­por­tu­ni­ties, it’s im­por­tant not to take things at face value,” he says.

While your in­vest­ment man­ager might tell you that the port­fo­lio’s ESG-in­te­grated, it’s up to you to check ex­actly which com­pa­nies are in­cluded in the in­vest­ment mix. Of­ten com­pa­nies from the to­bacco and other in­dus­tries score enough points to pass the ESG cri­te­ria, even if they don’t con­form to con­sumers’ ideas of eth­i­cal in­vest­ments. Davies urges con­sumers to ask the right ques­tions and in­di­cate to fund man­agers that there’s a real mar­ket for truly eth­i­cal in­vest­ment funds at a re­tail in­vestor level.

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