ESG Investing Today:

Environmental, Social and Governance (ESG) factors are seeing increased popularity when it comes to investing. Yet, there is a misconception that it is being driven by younger investors. In reality, this is not the case. We have been seeing many older clients, who have confidence in their financial plans, become more willing to ‘experiment’ with responsible strategies. So, how are things shaping up for ESG investing, and what might the future hold? We’ve asked financial planner, Ben Griffiths for his verdict!

Ben Says:

In my personal experience, 2 in 10 clients may raise the question of ethical considerations. However, when asked, 9 in 10 would prefer their investments to be responsibly managed. There is evidently a responsibility on advisers to bring responsible propositions to their clients’ attention. So, it is pleasing to see that regulation is being introduced to make this a requirement for all firms (under the EU’s Sustainable Finance Action Plan).

Undoubtedly, the rise in prominence of ESG propositions has been brought about by greater environmental awareness. David Attenborough, Greta Thunberg and Prince William have all been pivotal in bringing attention to the masses. Additionally, the pandemic has heightened awareness of inequality and the greater need for helping in the community.

Awareness has also been growing in terms of ‘governance.’ There has been a plethora of news headlines around recent scandals. Notably, KPMG’s UK chairman, Bill Michael, resigned after telling staff to ‘stop moaning’ about the pandemic during a virtual meeting. Also, Carlos Ghosn, former chairman of Nissan, Mitsubishi and Renault, came under fire for under-reporting his salary. Then came the subsequent exposure of his gross misuse of company assets. Clients are now keener than ever not to invest in companies that demonstrate ‘unethical’ leadership.

ESG Investing – The Outlook is Bright

As a result of ESG factors, the outlook remains strong for responsible investing for the foreseeable future. Those companies that have taken care to adapt their practices and procedures to reflect ESG principles can expect this to be to their advantage.  Alongside this, we expect the trend away from fossil fuels to continue.

Tech is a key component of most ESG funds, which has been the key driver of global equity returns during the pandemic. However, Big Tech is coming under increasing regulatory scrutiny at the moment. So, question marks may begin to emerge over their ethical credentials – excessive market power and tax avoidance scandals will pose serious ethical issues.

Ultimately, if the current trend continues, and there is every indication it will, ESG investing will become simply good business practice – and so it should! After all, surely we all want a world where sustainable human existence is more than just a possibility? Imagine it – a world where every business has ESG principles at its core, where every process or operation is driven by an urge to do as little damage to the natural world as possible – and where every employee is treated fairly. ESG investing serves a global, common interest, so its star is likely to continue rising. And who knows, maybe one day its principles will be so ingrained in the world, that ESG propositions can eventually become obsolete?

 

If you’re at all interested in finding out more about ethical investing, please do check out or Ethical and Sustainable Investing pages, or call us on 01243 767469. We’d be happy to talk you through!

 

Written by Ben Griffiths

Ben is a financial planner from our Whiteley office. While he specialises in pension planning, Ben is also able to generalise into all other areas of financial planning.

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