How to invest ethically
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You can make money and have a positive impact too says Jonathan Willis of Future Start Independent Financial Planning, Watford
The health of our planet is a rising concern. According to National Geographic, climate change started to become front page news more than three decades ago. Despite this, global warming continues to rise with 2019 the second warmest year on record according to the United Nations. Climate change continues to exacerbate natural disasters effecting millions of people across the world. In addition to climate change, each year 10 million hectares of forest are destroyed, mainly by agricultural expansion according to the UN, destroying the natural habitat for countless species. This rate of deterioration is unsustainable. For the planet to be habitable for our children, our grandchildren and countless species, action needs to be taken.
Two weeks ago, I watched an eye-opening programme by David Attenborough; A Life on Our Planet. I would definitely recommend it. It highlighted that in 1937 the world population was 2.3 billion and now, in 2020, this has skyrocketed to 7.8 billion. This growth in population has seen our carbon footprint increase astronomically from 280 parts per million to 415 parts per million which in turn leads to global warming.
In 2015 all UN Member States signed up to the 17 UN Sustainable Development Goals, which aim to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere, with a target of achieving them by 2030.
As a business that deals with our clients’ long-term financial plans, we incorporate Environmental, Social and Corporate Governance – the three central factors in measuring the sustainability and societal impact of an investment in a company or business – into our investment proposition as a matter of course. Over the past few years ESG investing has grown in popularity and importance, especially during the ongoing pandemic, where investors are seeking to ensure their investments are having a greater positive impact on the world.
ESG investment managers consider how companies interact with the environment, interact with society and run their business in the belief that these factors are critical to the future financial performance of the company. In theory, where these factors are considered, companies should outperform those who do not. Data compiled by the American financial services firm Morningstar has shown that the performance of ESG funds has kept pace with traditional investment options and in many cases has exceeded it, though, that said, performance alone should not be the sole driving factor for investors to choose ESG investments.
If you are concerned about the world in which we live you could consider looking into the global benefits of ESG funds for your pensions and investments. It may be worth seeking advice if you have specific preferences to where and what your money is invested in. For more information, do visit the Principles for Responsible Investment website. There’s more on Future Start here.
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