Now more than ever, people are understanding the urgency to act in a more ethical way.
We have a greater understanding on how our actions can impact the environment and society, and this has prompted may of us to change the way we choose to live our lives.
This sentiment has not stopped at reducing plastic use and recycling more. ESG investing stands for environmental, social and governance investing, which is a form of risk management which strongly considers these factors when investing. This often involves avoiding investing in companies that do the worst damage to the environment and invest in those that make strong commitments towards tackling societal and environmental issues.
Responsible investing is certainly now mainstream, but a lot of people still believe it involves sacrificing higher returns or is just a passing fad. In this article, we are going to look deeper into what ethical investing really involves, and how we can help you do it.
ESG Investing does not have to decrease your returns
There is a misconception with investors that they face a trade-off between principles and profit. However, there are more and more studies being released that show that companies which take environmental, social and governance risks seriously, and act accordingly, do not have decreased returns because of it.
It makes sense that ethical companies can benefit from acting that way. For example, if a company looks after its employees with compassion and has thorough health and safety policies in place to protect them, then the company shouldn’t face any big and costly lawsuits from something going wrong.
Pollution and poor governance aren’t rewarded
Fund managers are increasingly recognising that companies which fail to meet environmental, social and governance standards are investment risks, which need to be avoided.
Environmental risks are in the public eye now more than ever. As a society, we are now more aware and concerned about the increasing impacts of climate change, and how our plastic waste is damaging marine life around the world. Companies which are more willing to pollute our planet are more likely to be made to pick up the bill for the costs of these problems, which is never good for profit margins.
Social issues are also extremely important. A company which treats its staff, customers and suppliers with care and respect will often see the benefits through success. A company which doesn’t act responsibly risks a lot, as we now live in a world where social-media backlash can leave a company’s reputation in tatters for a long time.
Governance risk is certainly not a new consideration but is just as important as always. Companies with a bad track record in governance, which involves corruption, bribes and scandals, pose a big and distinct risk to shareholders returns.
Its not a passing trend
Governments are increasingly recognising the financial risks from issues ranging from climate change to poor treatment of the workforce and are pushing pension fund trustees to consider these issues as well. On top of this, the younger generation are more interested in sustainability than any generation before them, and can easily make or break a company with their enormous buying power. Sustainable companies are going to be rewarded more and more in the future, and firms who do not act responsibly will be punished.
Rowan Dartington Ethical & Environmental Portfolio
At Sovereign Wealth, ethical investing is something we feel passionate about. We can offer you the Rowan Dartington Ethical & Environmental portfolio, which could be your solution to ESG investing. Rowan Dartington is the discretionary fund management and stockbroking arm of St. James’s Place. The portfolio invests in funds that make responsible ethical and environmental decisions, meaning it avoids sectors such as arms, tobacco, alcohol, and pharmaceuticals. Ethical investing can be a complex subject, and this portfolio offers a pragmatic approach to investing responsibly and the table below shows the returns over the last 5 years.
Past performance is not indicative of future performance.
We feel the success of the portfolio could be the start of a long term trend, not only because of society’s current focus on ESG but because of the longer term benefit. Well governed companies tend to be forward focused and look to the future rather than relying on past glories. Given a difficult economic backdrop, caused by the current pandemic, this prudent and diligent approach is exactly what investors should look for when considering any investment, and is at the very core of our approach at Sovereign Wealth.
If ethical investing is something you would like to learn more about, we would be happy to help. You can call us today on 01858 791182 or get in touch <contact us page link> .
The value of an investment through Rowan Dartington and any income generated may fall as well as rise. You may get back less than the amount you invested.
If ethical investing is something you would like to learn more about, we would be happy to help. You can call us today on 01858 791182 or get in touch.
Get in touch.
We work with many local business owners and directors in Northamptonshire and Leicestershire, helping them and their families to become financially independent.
Whether you are a startup looking to scale or a seasoned business owner planning your next journey, we will take the time to understand your objectives and plan a course of action.
You can call us on 01858 791 182 or email us at the link below.Contact Us