A more sustainable approach to investing is gaining momentum, moving from a niche, bespoke area to a more mainstream investment.
It’s called ESG investing – the Environmental, Social and Governance factors that some Managers now consider when building a more sustainable philosophy within a portfolio. Public consciousness as we know has shifted on a broad range of issues and these ESG factors are a growing attempt to help address areas becoming increasingly important to savers.
This sustainable investment approach aims for strong, long-term returns with a desire to improve corporate practices thus benefiting society and the environment. This sounds very laudable of course, but versions of this have been around for some time receiving a somewhat lukewarm response due to a perception of higher costs and a trade-off in performance.
Interestingly the performance of some of the specialist funds in this area is very impressive.
Risk rated solutions from managers are also making this approach accessible to those looking for true diversification of risk, and more solutions are coming to market. In fact, Morningstar research shows that amounts invested into ESG funds have increased by 53% over the past year.
Electric battery development is for example a key focus for many of the traditional fuel suppliers, and the winners in this race could provide significant investment returns. Related to this, is the consistent income generated by wind & solar farms and this can also represent a strong diversifier.
We believe this is an exciting development where investing money in line with our own financial plan also creates a potentially greater outcome to our planet.
By Philip Harper | June 2021