Can you be an ethical investor and still make money?
We have always believed the answer was no, that ethical investing goes hand in glove with diminished returns.
Thankfully the world is changing, due to the actions of campaigners like Greta Thunberg, Extinction Rebellion and David Attenborough and the financial landscape is changing with it, making it easier to take positive investment decisions.
From the margins to mainstream
Ethical funds and socially responsible investment are nothing new. Both have been around a long time, but they always operated at the margins, only being chosen by those with very strong beliefs and often at the expense of overall returns.
Primarily, these funds suffered because of the restricted range of companies in which they could invest. Diversification was reduced, as certain industries that were extremely profitable were ruled out by criteria within the fund.
As evidence-based investors, finding a way to preserve returns whilst only using funds that have a positive impact was something akin to the search for the Holy Grail.
I am, therefore, delighted to let you know it is now easier to make ethical investment decisions and screen out high carbon companies or those with dubious working practises, for example, sweatshop labour. These criteria, along with gender diversity and pay equality, are increasingly being made public with company accounts. Indeed, the big four accountancy firms have now agreed some standardisation in the way this data is reported.
This consistency of practise can now be coupled with metrics being built by fund rating agencies to allow comparison of environmental social governance (ESG) factors. In turn, this is enabling fund managers to create portfolios that meet the ever-increasing demand for capital investments to be held in positive way. The Thunberg effect if you will.
Acting on ESG evidence
The increased focus on ESG investing continues apace. New legislation, to be introduced this year, will instruct advisers to take into account and record clients’ ethical preferences, if any. This will, no doubt, be a catalyst for conversations about investment choices, which is likely to increase demand further.
At Belmayne, it is our job to maximise your returns, in accordance with your identified attitude to risk and objectives. We have been monitoring the availability of ESG compliant funds for some time and now believe we can marry them with requirements for maximum returns.
Our philosophy is to follow the evidence and as such, we hope to move all of our clients into new portfolios through the first quarter of this year. This means you will be well placed to benefit from any upside that may be associated with ESG criteria at the earliest opportunity.
By investing with us, you can be sure any such move will be supported by significant evidence that demonstrates it can be achieved without sacrificing returns.
To find out more about ethical investing, don’t hesitate to contact me on (01246) 298181 or email: david.bashforth@belmayne-ifa.com
