There’s not a knitted yoghurt weaver in sight, and yet according to one investment platform, “interest in sustainability and ethical impact investing has shot up” in the last year.
The number of customers investing in green and socially responsible Exchange Traded Funds (ETFs), has risen by 237 per cent in 2017, compared to 2016.
Changes in behaviour are now driving a more active approach and we are seeing momentum build behind impact investing
Mark Taylor, chief customer officer for Selftrade from Equiniti, the online investment platform, made the comments ahead of this year’s Good Money Week, which runs from October 8 to 14 and champions the many ways there are to put our money to good use.
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Mr Taylor says: “Investors wanting to do good with their money is not necessarily something new, but historically this area has suffered from a lack of publicity and education. Investing with an ‘ethical head’ meant just dodging so-called ‘vice’ stocks in the fossil fuels, tobacco, arms and alcohol sectors. But changes in behaviour are now driving a more active approach and we are seeing momentum build behind impact investing. This means investing in companies which, alongside their motivation to generate profit, are also looking to actively ‘do good’.”
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“There are a number of factors driving this momentum. Businesses have started to respond to public pressure towards better corporate governance and have adjusted their business practices accordingly, opening up responsible investment to a much broader range of investors”.
“At the same time, there is a greater amount of research that challenges the historic criticism that performance in this space has lagged behind that of the wider market. Morgan Stanley’s Institute for Sustainable Investing published a detailed research note in March 2015 concluding that actively investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments, both on an absolute and risk-adjusted basis, across asset classes over the long-term”.
How do investors access ethical investments?
Mr Taylor says: “It is possible to invest directly in companies, and therefore make your own judgment on what you consider to be ethical and sustainable. But many people don’t have the time or the inclination. For investors who want to spread their risk, there are now a number of options, with many mainstream providers offering ‘green’ funds that invest using a variety of criteria. It’s worth also considering ETFs; there are a number of low-cost equity and bond smart-beta products that track specific socially responsible investment (SRI) indices. One’s that I like include:
iShares Euro Corporate Bond Sustainability Screened 0-3yr UCITS ETF (SUSE), for example, excludes debt from companies that are involved with controversial weapons, such as cluster bombs, land mines and chemical and biological weapons.
Then there’s UBS ETF World Socially Responsible UCITS ETF (USD), which invests in some of the most well-known global companies including Microsoft Corporation, Procter & Gamble Co and Walt Disney Co”.