With sustainability at the forefront of a lot of recent action, we discuss whether going green with your investments can really benefit you.
We’re becoming model citizens through recycling regularly, driving less, reducing plastic use and finding ways to conserve energy and water in our daily activities. And with quiet conviction, this sustainability has found its way into our financial dealings.
Ethical consciousness is becoming increasingly important to many investors who want to ensure their investment portfolios align with their values and mindset. The Global Sustainable Investment Alliance’s (GSIA) latest investment review found an increased demand for ethical and sustainable investing – there are now $30.7 trillion of assets being professionally managed under responsible investment strategies, an increase of 34% since 2016.1
How does it work?
Ethical investments share a common theme: the companies you invest in have been chosen because they remove a negative effect (think animal testing, fossil fuels, tobacco and weapons as a starting point). This approach is known as socially responsible investing (SRI). On the other hand, ESG – or environmental, social, governance – investing selects companies that have a positive impact, such as those working to provide clean energy or support deprived communities.
What does having a greener portfolio mean for my investment growth?
As is generally the case with investments, it is difficult to give a definitive answer for which approach will prove more successful. Whether an ethical slant on investing will lead to higher returns is dependent on market movement and sentiment, but fund managers are realising that heightened investor interest in sustainable investing calls for detailed research into funds that support investors’ ideals and provide beneficial returns.
It is also important to remember that when it comes to ethical investments, there are many options to choose from and this could quickly become confusing. For example, comparing non-ethical and ethical fund performance when researching funds of interest would give you an inaccurate picture of returns. This is where seeking advice from a qualified financial adviser could help you better understand what ethical investing could mean for your investments.
A financial adviser directly liaises with investment specialists and fund managers to discuss your needs and requirements and ensures the funds selected to build your portfolio reflect your ethical investment goals and values. An adviser can guide you on ethical investments that may provide higher returns - their advice based on extensive investment research and recommendations – which will give you peace of mind that your money is being invested in the right place while providing you with a desirable return.
This article is for generic information only and is not suggesting a suitable investment strategy for you. You should seek independent financial advice that takes your individual circumstances into account prior to proceeding with any course of action.