The Press and Journal (Inverness, Highlands, and Islands)

In­creased aware­ness now shap­ing the way we in­vest

ESG in­vest­ing is at­tract­ing grow­ing num­bers, says Mar­tyn Pater­son, fi­nan­cial plan­ner at AAB Wealth

- Business · Ecology · Investing · Climate Change · Greta Thunberg · David Attenborough · Rebellion Developments · Financial Times · United Kingdom

World En­vi­ron­ment Day, World Oceans Day, Na­tional Bike Week and World Day to Com­bat De­ser­ti­fi­ca­tion and Drought are all be­ing marked this month.

What can they teach us about how we should be in­vest­ing?

En­vi­ron­men­tal is­sues are in­creas­ingly big news, with Greta Thun­berg, Sir David At­ten­bor­ough and Ex­tinc­tion Re­bel­lion, among oth­ers, push­ing cli­mate change and pol­lu­tion into the head­lines.

In­creased aware­ness af­fects ev­ery­thing, from how we shop to how we re­cy­cle and it has an im­pact on how we in­vest too.

It was re­ported by FT Ad­viser back in 2018 that 52% of mil­len­nial in­vestors were al­ready in­vest­ing sus­tain­ably.

But what in­vest­ing?

ESG in­vest­ing means bas­ing your in­vest­ment de­ci­sions on en­vi­ron­men­tal, so­cial and gov­er­nance fac­tors.

It could mean avoid­ing com­pa­nies en­gaged in gam­bling, or the sale of to­bacco or al­co­hol.

Con­versely, it may mean ac­tively seek­ing out those com­pa­nies known is

ESG to be en­vi­ron­men­tally re­spon­si­ble.

En­vi­ron­men­tal in­vest­ing means choos­ing where to place your money based on fac­tors like a firm’s re­sponse to cli­mate change.

A firm with an aware­ness of its en­vi­ron­men­tal im­pact and an un­der­stand­ing of sus­tain­abil­ity is­sues is more likely to at­tract ESG in­vestors.

It is not just en­vi­ron­men­tal is­sues that gov­ern a com­pany’s ESG cre­den­tials.

So­cial fac­tors will also be a con­sid­er­a­tion.

Th­ese could in­clude staff work­ing con­di­tions, fair wages and how a com­pany sit­u­ates it­self within its com­mu­nity.

Gov­er­nance con­cerns the in­ter­nal prac­tices of a com­pany. Are share­hold­ers elected demo­crat­i­cally? Is ac­count­ing trans­par­ent? Are prac­tices of the busi­ness le­gal as well as eth­i­cal?

We all do our bit for the en­vi­ron­ment by re­cy­cling, turn­ing off lights and cut­ting back on plas­tic, for ex­am­ple, but still in­vest for one main rea­son – re­turns.

ESG was once thought to mean putting your prin­ci­ples be­fore your de­sire to make money but that doesn’t have to be the case.

A UK In­vestor Mag­a­zine re­port pre­dicted 173% growth and a mar­ket worth £48 bil­lion by 2027.

It is growth based on chang­ing pub­lic per­cep­tions around sus­tain­abil­ity but also on in­vest­ment re­turns.

Morn­ingstar re­cently re­ported 41 out of 56 of its ESG in­dices had out­per­formed its non-ESG equiv­a­lents since in­cep­tion.

Else­where, sus­tain­able bank­ing firm Tri­o­dos said its Global Eq­ui­ties Im­pact Fund re­turned 78.3% over the five years to Septem­ber 2019.

Af­ter cel­e­brat­ing World En­vi­ron­ment Day on June 5, most of us ac­knowl­edge the re­spon­si­bil­ity we all have for the planet and each other.

In­creased aware­ness of ESG is­sues has brought a rise in eth­i­cal in­vest­ment.

It’s an op­por­tu­nity to place your money where your be­liefs are, while also achiev­ing po­ten­tially great re­turns.

?? ?? CHANGES: Cam­paigner Greta Thun­berg is one of the fig­ures draw­ing at­ten­tion to the en­vi­ron­men­tal is­sues in­flu­enc­ing in­vest­ment trends
CHANGES: Cam­paigner Greta Thun­berg is one of the fig­ures draw­ing at­ten­tion to the en­vi­ron­men­tal is­sues in­flu­enc­ing in­vest­ment trends
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