Environmental Investments – Are they right for you?

You cannot turn on the news these days without reading articles about climate change and taking a more responsible approach to looking after the environment.

Whilst you may well be ready to fully endorse this attitude, what can you do to support this global focus?

Investment houses are also recognising this, and many of them now offer a range of investment opportunities that are widely known as ESG funds – Environmental, Social and Governmentally responsible investments.

Whilst not all investments offer the chance to differentiate which funds you invest in, many do allow you to select your focus. So, if you wish to focus on green issues and the environment you can choose those.

What are so called greener funds focused on?

Many invest in renewable energy projects – the continual exploration and development of alternatives to fossil fuels such as solar power and wind turbines. They may also focus on the reduction of air and water pollution and new ways to combat these problems.

Investments in other countries may include improving water infrastructure, waste management and green belt development to combat previous activities. Equally, sustainable food solutions, technology infrastructure and children’s education are becoming increasingly popular trends.

Most investors committed to supporting the environment have concerns that reach beyond the UK. If you are one of those, you will be relieved to know that fund managers responsible for ESG funds are usually very selective about the countries they invest in. They will avoid countries with poor social records, bad health and safety, weak green credentials, loose employment laws, particularly around children or generally poor human rights track records.

When focusing on the UK or other countries with a better reputation, there is still a huge emphasis on being selective about the companies and technologies that are chosen. Animal testing, animal fur, pornography, gambling, weapons, tobacco, nuclear power and fossil fuels are often top of the list of areas to avoid.

You know what causes and concerns are closest to your heart, so you need to do your homework, to make sure any investment funds you are considering are going to tick the boxes for your beliefs.

You may feel strongly about certain corporations and their practices. You need to ensure your investment will not be supporting any of those organisations – if this is a key concern.

Equally, you need to understand how the fund is being managed.

Some ESG funds are not focused on producing high returns for their investors – is that important to you?

That said, many ESG funds have been outperforming those outside of that category, in recent times.

If clients are considering ESG investments we encourage them to do so because it is an important issue for them, rather than because they see it as yielding a higher return. If the return is high too, then that is a good bonus.

If you would like to discuss environmental funding in more detail, please contact us on 01374 875 310.

environmental investments