Square Mile Investment Consulting and Research breaks down the market into five main areas.Įthical exclusion: Avoids industries and company practices that harm people or the planet. Getting startedĪ good place to get started is to get to grips with the investment jargon, which can be baffling.ĮSG investing - environmental, social and governance - covers a wide range of ethical priorities.
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James Rich, a senior portfolio manager at Aegon Asset Management, said: “In the absence of a common industry standard, issuers of labelled bonds can be prone to false promises,” pointing to missed reports or poor tracking of outcomes.įT Money outlines how to make your pension investments more sustainable and be alert to greenwashing. Last month, for instance, Aegon Asset Management issued a warning to bond investors that they were at risk of becoming victims of greenwashing as the global issuance of green, social and sustainability bonds - so-called “labelled bonds” - has surged in recent years.
“But over the past few years, the thinking has shifted from how can we simply take out what is negative to how can we allocate our capital towards companies making positive changes for society and the environment.”Ī greater choice of funds means individuals seeking more sustainable investments can make a more rigorous selection as they will have a growing range of better- and worse-performing managers.īut making the right decision can nonetheless be highly challenging: there is little standardisation in the way funds are described, putting inexperienced investors at risk of buying something that isn’t quite what it says on the tin. “Ten years ago, if you were interested in investing, then your only real choice was to screen out the ‘sin stocks’ like alcohol, tobacco and weapons,” says Jeannie Boyle, executive director at EQ Investors, a wealth management firm which specialises in positive impact investing.
Making ethical pension choices is no easy taskĭriving this trend is the wider choice available to investors wanting to align their money with their values. Net assets held in UK-domiciled ESG funds went from £29bn at the beginning of 2017 to £71bn by the end of 2020, including active and passive funds. Global ESG-linked funds took in nearly $350bn last year, compared with $165bn in 2019, according to data from Morningstar. The growth of funds invested along ESG principles - environmental, social or governance - has been rapid in recent years. “It is significant. People are waking up to the fact they can make a monumental difference by changing their investment strategy so it is well tuned to the planet,” he says. “Our research indicates that moving a £100,000 pension pot with a traditional portfolio with oil and gas companies to a positive impact portfolio is the equivalent of taking five or six cars off the road a year,” says David Macdonald, founder of The Path, a firm of advisers that specialises in positive impact investing. From recycling our rubbish or going vegan, to using the car less often, many of us are making small changes to our daily lives to reduce harm to the planet.īut choosing to go green on our pension investments could have a far greater impact, as the institutions managing our money may include both heavy investors in fossil fuels and those seeking environment-friendly alternatives.
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