How to Grow Your Wealth and Save the World
For many there is a fine line between personal-gain and contributing to the world around us. We all have our own needs, wants and hopes, and it’s often not viable to sacrifice our own wellbeing to help others, despite an urge to do so. But what can you really do? Can one person really make a difference, yet still ensure their personal needs are met?
"In recent years, Ethical Investments, or ESGs have been created to help people invest in schemes that provide eco-friendly solutions to the world and support society."
Thankfully, investment houses have taken note of this dichotomy and are providing a solution.
Do you remember a time when the world laughed at electric cars? The imaginings of these futuristic ‘robots’ felt a little like you were peering into the obscure and incongruous mind of a sci-fi writer; what would be next? Flying microwaves?
But jump to the present day and electric cars are very much a reality; so much so that I’ve got two charging on my driveway! Electric cars are just one way people are saving money (personal gain) and helping others (benefitting the wider world).
We are starting to pay heed to the warnings over global warming and are now fervently fighting to save our planet. Being ‘green’ and socially responsible is more than a fad; it’s becoming a way of life that is crucial to the future of our planet. And, most importantly, people are genuinely passionate about it. It’s not that we’ve suddenly learned compassion, it’s that we now have more opportunities to play an individual role in the battle to save our surroundings.
Over the last 3 years, an investment trend known as ‘Ethical Investing’, or ESG (Environmental, Social and Governance), has provided one such opportunity for people to grow their own personal wealth whilst sustainably investing and acting with social responsibility. Ethical Investment incorporates environmental and social factors when selecting funds, but also aims to provide a competitive financial return.
Whilst it would not be prudent to try and compare the returns from the ‘old stock’, such as tobacco, alcohol and arms, with the new ‘green kids on the block’, many experts are suggesting that Ethical Investing is on the brink of something big. The Financial Times stated that “Investors are finding that if they are good to the planet and to people, they also end up, on average, benefiting themselves. There is mounting evidence that funds which observe environmental, social and governance (ESG) standards in their strategies tend to outperform those that don’t by a significant margin.” 1
It is important to note here that Ethical Investing can increase your investment risk, and can potentially reduce the investment returns. Why is that? Because by limiting your investments to only ethically focused companies, you limit the pool of investments that can be selected from. Particularly when the Investment Manager is selecting funds, there are far less options to choose from.
That said, since the UN Principles for Responsible Investment were introduced in 2006, we have started to see the likes of the Vanguard Group and Fidelity Investments increasingly offering Ethical Investing; a trend which doesn’t show signs of slowing. Guido Fürer, the chief investment officer for Swiss Re, has also said that “It is more than doing good — it makes economic sense,”2
It is not our job to influence you as to which way you want to invest, but to give you the options so that you can make the right decision for you. So I wanted to let you know that your Discretionary Investment Managers, PortfolioMetrix, have added a selection of Ethical Portfolios as part of their offering. You can maintain the same risk level as you currently have with your portfolios, the only difference being that the underlying holdings will then meet the criteria for and ethical portfolio.
This isn’t an all or nothing choice either. I would not necessarily recommend you move your entire portfolio over to the ethical portfolios, however if this is an area that is important to you, you may wish to change the strategy on one of your accounts (e.g. your ISA) so that some of your money is being pushed towards more ethically minded operations.
If you would like to know more about how you can elect to invest in the portfolios that are more in line with your social and environmental views, we would be delighted to discuss your options with you.
Please get in touch by calling 01572 898060 or emailing [email protected]
- Financial Times- 3rd September 2017
- Financial Times- 3rd September 2017