Ethical, Sustainable and Green

There is no doubt that the buzz words ‘Ethical’, ‘Sustainable’ and ‘Green’ are becoming increasingly popular in everyday conversations. It is generally defined as ‘the quality of not being harmful to the environment or depleting natural resources, and thereby supporting long-term, ecological balance’.

Investing

In respect of investing, it normally involves projects that promote the use of sustainable energy and materials. A good example might be energy from the sun or wind, combined with materials that grow naturally, such as plants and trees that can be replaced. A bad example might be the use of fossil fuels for energy and single use plastics.

If there is an overarching view that sustainable provision of energy and/or products is a good thing. It might also be viewed that the opposite will decrease, which in turn could result in lower demand of ‘bad’ products and services and the consequential reduction in profits, which makes them less attractive to invest in.

It is not guaranteed that positive sustainable industries will thrive; their costs might be greater, expertise might lag behind and other complications over the life of a product could have unforeseen consequences. Investments require skilled analysis and sometimes a bit of good fortune to become profitable.

Individual and corporate investors are more sophisticated and tend to challenge more than in the past. There are investment funds that invest almost exclusively in sustainable projects and companies that demonstrate good practice. There are investment funds that have a large proportion of sustainable and additionally other topical content that may be viewed as Sustainable, Ethical, Green or Environmentally Friendly.

Environmental, Social and Governance

Investing in ethically sound, socially responsible or ‘moral’ ways now has a new set of letters: Environmental, Social and Governance – ESG.

However, ‘doing the right thing’ can sometimes come at a cost. I can recall a time when few options were available and fund performance was ‘a bit lively’.

With a significantly greater choice of fund managers who know what they are doing, a wider range of investment options and greater clarity in terms of company management and responsibility, there is now a wide choice, that requires expertise when it comes to selecting the funds that tick all of the boxes the investor considers to be important.

Positive Screening

Some funds actively reject certain industries and practices, known as Negative Screening. Positive screening sets out to search out environmentally friendly products and/or socially responsible business practices.

For financial planning advice on investments, or retirement and estate planning, seek out an Independent Financial Adviser, with a good record of delivering simple financial advice that works.