Investing on principle

Whether it’s the Extinction Rebellion protests or Greta Thunberg’s speech to the UN, there has been a renewed focus on climate change in recent months, and what individuals can do about it.

This has led to calls for investors to divest funds away from ‘harmful’ industries and sectors such as oil and gas, mining and airlines, which are some of the biggest producers of carbon and other greenhouse gases. This doesn’t just apply to organisations with millions of pounds at their disposal. Ordinary investors also have opportunities to ‘green’ their ISAs and pensions.

Ethical funds

These funds take a more principled stance on investment choice. Many screen out companies or sectors that do not meet their guidelines, which vary from fund to fund.

Some older funds traditionally avoided sectors such as alcohol and armaments. Today many have a more environmental remit. However, while some funds exclude whole sectors such as oil and gas, others take a ‘best of breed’ approach, investing in companies with better records on issues like pollution, water waste and recycling.

ESG investments

Funds that adopt this approach take into account environmental, social and governance (ESG) factors, alongside standard financial data, when deciding whether to buy or sell a stock. This can help identify whether the company is likely to be a profitable long-term investment in a world which is more environmentally aware.

You may be a relatively small investor. But it’s worth bearing in mind that the UK pensions industry is worth over £2tn. While your retirement funds are managed on your behalf, you can choose where this money is invested. Please get in touch if you want to discuss your options.

 The value of your investment 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.

 

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