Article

What is sustainable investing?

NB – 1920 – Sustainable investing

Sustainable investing is about delivering results for today without compromising the world of tomorrow.

With sustainable investing, investors aim to achieve financial returns while promoting long-term environmental or social value. Unlike other more traditional investments, it ensures firms aren’t judged solely on short-term financial gains but on broader criteria of how they contribute to society.

Sustainable investing strategies go through a screening process to exclude specific sectors and companies which are detrimental to the environment and society. They also make a conscious effort to include those that make a positive difference. This investment process encourages investors to think critically about the potential impact their investments may have from an environmental and societal perspective. A portfolio’s sustainability impact is evaluated using ESG factors:

Environmental

This is the part of the investment process which reviews the company or fund’s impact on the environment. Analysts will examine criteria such as the size of their carbon footprint, whether they produce greenhouse gas emissions and if they cause any deforestation. They will also look at resource depletion factors including water, waste and pollution.

Positive environmental impact will also be analysed in this process and if criteria are met, these companies or funds will be selected to make up the portfolio. For example, this could include if there are sufficient commitments to recycling and the use of clean technology in supply chains.

what is sustainable investingSocial

The sustainable investing process also reviews a company or fund’s impact on society and how it advocates for positive societal change. Analysts closely examine its involvement and stance on social issues such as the funding of global conflict and working conditions for employees. This can also include human slavery and child labour, the impact on local and indigenous communities and human rights violations.

Analysts will seek out companies to include in ESG portfolios which promote ethical and socially conscious business practices such as strong diversity and inclusion in management boards and teams, positive employee wellbeing and local volunteering commitments.

Governance 

Finally, analysts will review how a company or fund is managed or “governed” for driving positive change. This review encompasses the quality of management teams, scrutinising areas like executive pay, bribery, corruption, tax payment, political lobbying and donations, board structure and diversity.

Is sustainable investing for me?

There are many sustainable investment solutions out there for investors, with scope to select the right funds that align with individual needs, values and objectives.

In a cost-of-living crisis, with rising interest rates and high inflation, investors may often want to prioritise financial returns over their ethics, putting sustainable investing on the backburner. However, if we are to meet society’s goals for a sustainable economy, supporters of this aim will want to show how sustainable investing can also be seen as a long-term value driver rather than just a “nice to have” option in economic fair weather.

Encouraging companies and funds to adopt more sustainable practices can create a demand for purpose-driven businesses that are improving society and managing their environmental impact. As this demand grows, global issues such as climate change are more likely to be addressed and steps taken to protect our planet for the next generation.

If you would like to discuss how to incorporate sustainable investing into your financial plan, please get in touch.

Important Note

The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale.

This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product.

Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

If you are unsure about the suitability of otherwise of any product or service, we recommend that you seek professional advice.

Past performance is no guarantee of future performance.

The value of an investment and the income from it can fall as well as rise and investors may get back less than they invested. Your capital is therefore always at risk. It should be noted that stock market investing is intended for the longer term.

Meet the expert
Richard Gillham
richard-gillham-png
Financial Planner

Richard joined Progeny in January 2021, following more than 20 years in investment management, primarily with Legg Mason. He is excited to be joining Progeny and building a new career in wealth management. He started his career in 1997 with Mercury Asset Management which was subsequently acquired by Merrill Lynch.

He was made a Managing Director at Legg Mason in 2010 and covered equity strategies as well as macro strategy for a diverse global client base. He was also responsible for leading a diverse team of investment specialists.

Richard has an expertise in sustainability having worked closely with firms that integrate sustainability factors and balance profit with purpose. He believes that the linkages between sustainability, the economy and the financial markets are stronger than ever following the health crisis.

Outside of work, Richard likes to spend a lot of time with his three teenage children. He is also interested in politics and investing in companies that have a positive social impact and can help the transition to a more sustainable economic growth model.

Capital gains tax on divorce
Financial planning
Capital gains tax on divorce – new rules
Pick up where you left off You've read this article
richard-gillham-png
By Richard Gillham
28th April 2023
Premium Bonds
Financial planning
Premium Bond prize rate increased
Pick up where you left off You've read this article
richard-gillham-png
By Richard Gillham
8th February 2023

Speak to the team

"*" indicates required fields

Do your investable assets exceed £500,000?
Untitled
This field is for validation purposes and should be left unchanged.

Search