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


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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