How many reusable bags do you have stacked up by your entryway? Go ahead and think about it. Avoiding plastic is great — but what can you do?
ENTER STAGE LEFT ‘FEEL-GOOD’ RESPONSIBLE INVESTING.
Never heard of it? No worries, we’re here to help you stay up on your do-gooder game.
It’s all about making a positive impact on the world. But fear not – this isn’t about charity, it’s about making money while doing good.
Responsible investors lead with their heart, not just their brains. They decide what’s important to them, and put their money into companies with matching values. For example, responsible investors may want to protect the planet, so this type of investor could choose to invest in a cleantech business. Responsible investing also has a few other names – impact investing, ethical investing or sustainable investing and you can technically think about them all in a bunch of different ways.
And that’s what responsible investing is all about. Every individual choosing to redirect their money away from companies and business activities that harm the world to ones that either don’t
It’s also in the eye of the beholder. As people care about different things, what is sustainable for you may be completely different for someone else. People also have different tolerances to certain issues so you can think about responsible investing in the same way as food – are you a strict Vegan, or more of a Vegetarian, or someone who is focused on organic food production or simply a middle-ground shopper who likes to buy fresh local produce? Based on your own personal values, there are so many places you could land on both the food and investment scale.
SO, LET’S START WITH A FEW BASE POINTS TO CONSIDER:
IMPACT INVESTING – Typically investments made into projects, companies, organizations, and funds where you can see and understand specific social and environmental impact goals, alongside financial returns. Up until recently Impact investing was really hard and expensive to access. With the rise in tech focussed impact investment companies and funds, this has become much cheaper and easier.
AVOIDING THE SINNERS – This is all about avoiding, or screening out, what you see as the bad stuff. For example, avoiding investments that relate to specific activities, e.g, fossil fuels, tobacco, alcohol, military, porn, predatory lending or even Trump businesses.
INVESTING IN WORLD-CHANGING THEMES – Often a really easy way to get exposure to issues such as climate change, equality, food, water, renewable energy, clean technology, or agriculture. All now easily accessible for new and young investors through low cost and Funds (ETFs) focussing on these areas.
FINDING YOUR BALANCE -For some, even seemingly bad companies can do good. Banks which fund most of the areas people screen out, like Fossil fuels, are also some of the best businesses when it comes to promoting diversity and equality. Sometimes referred to as Best of Breed, this approach is finding what you care more about and making a decision on balance.
ACTIVIST INVESTING – Every share owned is one vote! With enough votes, investors have the power to change and influence corporate behaviour. Unless your frickin loaded, this one is up to the Platform or Fund you invest through. The actions of a community of investors can be used to drive change!
WHY IS THIS SPACE GROWING SO QUICKLY?
A convergence of once in a lifetime factors shifting the way that people have to think about growing their money. People are being locked out of the property market, savings rates on cash are at an all-time low, we live in a world of increasing job insecurity, and there is a lengthy time in the transition of wealth from one generation to the next. A huge number of these people are turning to investment solutions that match how they carry out the rest of their lives… if they live then they want to invest in the same way.
There also some other big stuff going on the world. We’re increasingly disillusioned with our politicians who are not taking the issues of our future seriously (eg climate change). This means it’s now up to us and the companies we consume through to drive change – according to Deloitte 80% of people now look to business, not governments, to create a more sustainable future.
People are getting clued in. They know that financial returns and strong sustainable performance are no longer mutually exclusive. So when that comes to investing over 90% now believe that impact is key!
Tech has a part to play. The rise of technology-driven companies and funds who care about impact as much as their customers are making investing cheaper, easier, providing education and focussing on impact.
WHERE IS IT GOING NEXT?
Responsible investing is evolving rapidly which means simple offerings no longer cut the mustard. Customers want to be able to define what sustainability means for them and not solely rely on options given to them by some anonymous fund manager in a suit.
There is also a shift to how companies talk about impact. The UN has created 17 Sustainable Development Goals designed to help change the world and investors and investments are now contributing to that.
Tech is leading the charge in demonstrating impact much as a charities do. The future is about being able to show an investor the impact of every dollar they have invested in the key areas that each investor cares about. Whether that’s avoiding carbon emissions, or rebalancing the workforce so it’s more equal, or lifting the health of local communities.
WHAT SHOULD YOU WATCH OUT FOR?
Providers who are just in it for the opportunity but don’t really care about the outcome. There are plenty of funds that you can invest your money in but be careful they are in it for the right reasons. If they are not then you’ll probably find that the fund will contain a heap of companies that you might not pick yourself.
Beware the Greenwashers. Greenwashing is basically companies making unsubstantiated or misleading claims about the environmental benefits of a product, service, technology or company practice. A claissic an oil company demonstrating how much they spend on renewable energies. Whilst the overall number can be big, it’s often minuscule compared to the amount spent on oil production, plus they are still producing oil… Greenwashing can make a company appear to be more environmentally friendly than it really is.
HOW CAN YOU GET INVOLVED?
First work out a few things like, is this the money in your Wallet or savings account, or your Super? And how involved do you want to be the decision? Answer these questions, and then find the appropriate platform to take action.
*Happy investing, do-gooders! *