Ethical Investing - What Does The Future Hold?

December 2021
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Global environmental and social issues feature daily in our news and media feeds. We’re all now familiar with Greta Thunberg and climate activism groups like Extinction Rebellion. As a nation we recycle more than ever, we’re reducing our consumption of single-use plastics and buying more electric and hybrid vehicles – all pointing to an increasing desire for us as individuals to make a positive impact on some of the world’s biggest issues.

This huge shift in focus on and awareness of global environmental and social issues has resulted in greater scrutiny of the way organisations treat staff, customers, and the environment. Royal London recently published research(1) on ethical investing and the results highlighted some interesting inconsistencies:

  • 67% of people believe we face a state of emergency due to global warming
  • 71% think everyone is responsible for taking action to address the climate crisis

However, when consumers were asked what actions they felt would have the biggest impact on the fight against climate change, just 7% felt that considering the way their pension and investments are invested would make the biggest difference. But it’s suggested that making your pension green could cut your carbon emissions by 21 times more than going veggie, giving up flying and switching energy provider(2).
 
Taking action
Most of us have made changes to our day to day lives to reduce our environmental and social impact, taking our reusable shopping bags to the supermarket and opting for the reusable coffee cup over disposables. But just 15% of people are already investing their pension responsibly(3), so what’s stopping people from taking that step? Royal London’s research points to the role of education and advice. Once shown the impact responsible investing can have:

  • 57% said they were willing to have their pension invested responsibly – increasing to 66% among 18-34 year olds
  • 44% claim they would consider a net zero pension over what they currently have
  • Almost half (47%) said they would still be interested in such a product, even if their charges would be higher or their investment returns lower

It’s not hard to see why there’s a need for education. ESG investing has evolved from simply avoiding investment in the ‘bad’ things such as arms, tobacco, fossil fuels to a more complex evaluation of the positive impact organisations are making. With much in the press lately about ‘greenwashing’ leading to scepticism about ESG claims. And there’s a whole raft of new terminology to get to grips with. Here are a few key one terms that regularly crop up:

Ethical – Avoid industries and company practices that cause harm to people or the planet

Responsible – Covers a range of investment approaches that aim to deliver positive change – as well as a positive return

Sustainable – Actively seek to invest in companies that offer solutions to social and environmental challenges

Impact – Look to generate positive, measurable social and environmental impact alongside a financial return

What does the future hold?
Consumer interest in ESG investing looks set to continue, with attitudes generally shifting towards accountability of individuals, organisations and governments for their impact on the world around them. And with research showing evidence that the application of ESG principles delivers financial benefits both in terms of corporate performance and in the performance of investment portfolios, the concept of ESG investing looks like it’s here to stay. 

At LEBC we recognise our role in creating a positive impact and are working to become a more sustainable business. We’ve recently expanded our investment proposition from a single Ethical portfolio to 5 risk-rated ESG portfolios which are all rated MSCI ESG AA or AAA which is recognised as leading. 

For more information on investing ethically please e-mail us at clientenquiries@lebc-group.com, use the live chat on our website or get in touch with your financial planner.

Ben Doyle
Marketing Executive

1. Responsible Investing – Fad or Future, Royal London, November 2021, accessed 8 December 2021 https://adviser.royallondon.com/globalassets/docs/adviser/investments/brppd0027-responsible-investment-fad-or-future-report.pdf

2. Make My Money Matter website, https://makemymoneymatter.co.uk/21x/ accessed 9 December 2021

3. Responsible investing: New evidence, new energy, Royal London & EY, October 2020, accessed 9 December 2021 https://adviser.royallondon.com/globalassets/docs/adviser/investments/2010-ey-royal-london-paper-oct-2020.pdf

The information contained in this article is based on the opinion of LEBC Group Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy, you should seek independent financial advice before embarking on any course of action.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.

When investing your capital is at risk.

 

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