The growing demand has been backed by increased political pressure for fund managers and pension trustees to incorporate environmental, social and governance (ESG) factors as part of their investment process.
Those that support this responsible investment approach argue that this isn’t just about doing the right thing: it is about managing longerterm risks and generating sustainable returns.
Understanding the ethical market
It is important to understand some of the different terms used.
Dark Green Funds: These funds follow strict guidelines and typically screen out certain sectors completely, such as armaments, fossil fuels, tobacco or gambling industries.
Light Green Funds: These funds have a more flexible remit. For example, rather than avoiding all oil companies, they may invest in those with the best track record of developing renewable energy.
ESG Factors: Fund managers may look at ESG factors as part of their selection process. This means looking at a company’s record on waste and pollution, deforestation, employee diversity, health and safety, executive pay, board structure and tax strategy.
Impact Investing: Your money can be invested in companies or projects that have the potential to deliver positive social or environmental outcomes. Please get in touch if you would like to discuss your investment options.
The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.