Responsible investment has arrived with ESG

Major changes in how we shop and how we invest

Environmental, Social and Governance. ESG made simple with Nikki Williamson

After years of humanitarian work, trying to make some kind of difference in neglected communities around the world, I returned to London a few years ago to work in fi nancial services. A leap, some would say, with a fair amount of ethical ground between. But in fact, I fi nd myself amongst a swelling momentum for ‘responsible investment’, where decisions of big infl uential investment houses are taking environmental and social matters into account.

What this means in reality is that the owners (institutional shareholders – like pension funds) of those large companies listed on the stock exchange are asking for a different set of results from the business. They are no longer single minded about fi nancial returns, but demanding reporting on the likes of carbon emissions, labour rights, waste management and board diversity. These are just a handful of hundreds of indicators being increasingly considered to show a company is operating sustainably. And the best news is, the motivation is not only ‘a good show’. It is becoming increasingly proven that taking this stance of sustainability is the key to achieving the longterm economic stability required for investment professionals to meet the needs of their clients. So, as many of us are changing our consumer behaviours and making ethical choices for our shopping basket, we might also therefore pay attention to this new option in our pensions, ISAs and investments. Given the scale of the investment market, this means tackling our most pressing social and environmental issues from top down as well as on the ground. No longer does simply having a pension mean that you are inevitably part of activities that are damaging the environment or conducted in poor working conditions, and I can say from my perspective, I hope to make more of a difference this way than I did working in the fi eld. And this infl uences at home as well as globally, as corporate behaviour such as data security, diversity programmes and supply chains are being scrutinised under the same measures.

Typically, language used when it comes to naming funds is not particularly relatable, so if you do want to look at your own pensions and investments, some key terms to look for might be ‘sustainable’, ‘responsible’ or ‘ESG’ funds. ESG stands for Environmental, Social and Governance, which are considered the pillars of economic sustainability. But not all funds will be labelled this way, and your pension may well be looking at ESG in parallel to its core objectives. If you can, speak to your provider or an advisor to fi nd out how your money can be working positively for the future. n