FINANCE

Sustainable investing: What you need to know

Investors are increasingly applying prioritising environmental, social, and governance (ESG) factors in their decision-making for identifying risks and growth opportunities. Jillian Thomas (pictured), managing director of financial planning service Future Life Wealth Management, explains why.

David Attenborough and the 2019 Australian bush fires have propelled ethical and ESG discussions into the mainstream, enabling a far broader discussion about the future of our planet.

It’s not just people like Greta Thunberg who are sitting up and taking notice of what is happening with the Earth – investors too are looking at what their money is paying towards. As the saying goes, put your money where your mouth is.

In the past, our clients tended to invest for the best returns. Traditional investment practice typically ignored how companies operated or what they did.

Some people did try and avoid investing in certain sectors –tobacco and arms, for example, in what you might call “ethical exclusion” – but historically most of our clients’ concerns were fairly traditional in thinking about where to invest. We looked at attitude to risk and your future plans.

However, our clients are increasingly asking about what they are investing in.

INVESTORS NOW PRIORITISING RESPONSIBLE BUSINESSES

Remember, when you invest in a fund, your money gives financial support for the companies or

‘We, as individual investors, collectively have the power to influence what is known as ESG or how companies are run’

organisations in which the fund invests. People are starting to think beyond just avoiding harm. Now investors are thinking about benefits, for people and the planet.

For example, investing in companies that follow responsible practices. It might be one that treats its workforce well or one that is reducing its impact on the environment.

And you can go further – you can invest in funds that support companies that have a positive impact on the planet. They might generate renewable energy, improve energy efficiency or address healthcare needs.

We, as individual investors, collectively have the power to influence what is known as ESG or how companies are run and what they do, or don’t do, to harm or help people and the planet.

And if you think that, ultimately, the global economy is dependent on how well we manage and share the world’s resources, taking ESG factors into account actually makes financial, as well as ethical, sense in the long term.

ESG INVESTING IS RISKIER

But a few caveats. Excluding some sectors for ethical reasons means you are starting to limit where you can invest.

Investing in companies that have the intention to make a positive social or environmental impact will limit your choices further.

It also brings more risk. These may be companies with a smaller number of stocks, potentially increasing their volatility. So, we still need to look at your attitude to risk when thinking about ethical investing. It is not just on the side of the investor where there is a focus on ESG. Companies know it is important too.

REPLACING CSR WITH ESG

In the old days, we talked about CSR – or corporate social responsibility – maybe staff were given paid days to do voluntary work or the company sponsored the local junior football team.

But ESG runs deeper. It is about major changes in how companies actually do business, about how they can essentially do good.

When you have examples like BP and Shell both pledging net-zero emissions by 2050, you realise it isn’t just Greta Thunberg who is doing the talking – big businesses are too.

And as investors, we can think about where we put our hardearned money to make ESG more than just a passing fad. After all, the planet depends on us taking the long-term view.

No individual investment advice is given, nor intended to be given, in this article and liability will be accepted in respect of any action you may take as a result of reading this article. If you are unsure, you are urged to take independent investment advice.

Aston Lark announces latest major acquisition

Aston Lark shows no signs of slowing down on the acquisition front after buying Venture Insurance Brokers Ltd.

The Goldman Sachs-backed national chartered insurance broker, which has an office in Derby, announced the takeover of the Bristolbased company in early March.

Venture Insurance Brokers offers traditional insurance advice to businesses and individuals, with specialist expertise in professional indemnity insurance, property management, haulage, small business solutions and risk management.

Aston Lark group CEO Peter Blanc said the acquisition would help expand its presence in the South West.

“From our initial meeting with the Venture team, we have been continually impressed with their ‘client first’ approach which sits perfectly with the ethos of Aston Lark,” he added.