Why do we invest? Clearly, it is to make money. How we invest, in which products and the way we allocate that money between markets and asset classes will determine the potential return we receive.
For most of us, the returns that we make are put towards our goals, such as providing income in retirement. Our ability to impact the world we live in, to do good, through spending our money is constrained by our practical needs. But what if we could do good in the way we make money, through our investments?
One of the arguments against ‘ethical’ investing is that it delivers sub- average returns. That is no longer the case. The FTSE 4Good UK index, which measures performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices, has recently started to demonstrate out-performance compared to the FTSE All Share Index.
I have previously raised attention about a paradigm shift that is occurring in areas such as technology and social consciousness and we see it also in the development in attitudes to responsible investing.
In the institutional world, particularly amongst pension schemes, focus on principled investing has been increasing every year and statistics from the Investment Association on retail investing, show that while funds with ‘ethical’ mandates currently account for just 1.6% of total industry assets, the volume of money going into ethical investments has risen 17% in a year.
Clearly interest is growing among ordinary investors – but to what extent?
At the end of September, the Government published the results of what it described as “the largest and most comprehensive study of the UK public’s demand for sustainable investment opportunities”. This demonstrated high levels of interest in responsible investing and identified key barriers as well. The research surveyed around 6,000 people, using census data to ensure the results should be an accurate representation of the UK population, and included 1,018 people with at least more than £25,000 of investable assets.
The report found that 68% of investors said they wanted their investments to consider the impact on people and planet while also making them a return. Interest was highest among people with investible assets over £25,000, millennials, and women.
What was holding people back the survey found was a lack of the availability and accessibility of products, misconceptions on risk and return, confusing terminology and a lack of clear and simple information about sustainable investing.
This is something the asset management industry is tackling. Our research shows that more and more investment companies are embracing responsible investing, with a recent and notable market swing away from companies that operate counter to ethical principles and the UN Sustainable Development Goals. Companies that have positive policies and practices in respect of key issues, such as climate change, use of plastics, how they treat their staff, and their trading partners, are going to be the beneficiaries of future investment.
What we see is an investment market that is changing, making it ever more possible to align our personal principles with responsible investments that deliver returns. It is a positive change that we at Lowes, for one welcome.
To see how Lowes could help you, arrange a free initial consultation with a Lowes Consultant by:
Call: 0191 281 8811
Source: Investing in a Better World