Investing in the environment

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investing in the environment

13 April 2021

 

Sustainable living is on the rise

Now that spring has arrived, whilst it’s not time to put away the jumpers and coats quite yet, it does feel like we’re approaching sunnier times – both in weather and outlook, especially with the gradual ease of the national Covid-19 lockdown. The start of a new year or springtime is often the time for people to carry out their resolutions; we may start to eat healthier or take advantage of the lighter nights and early mornings and go for a run.

Many of us are also becoming a lot more environmentally conscious. This is attributed by certain public figures like Sir David Attenborough and Greta Thunberg, but it has also emerged that lockdown has helped change various habits and priorities regarding the environment and sustainability, especially around the home. A survey by Bulb energy provider in July 2020 found that out of 2000 people, 37% of people in the UK say they’ve lived more sustainably in lockdown, ranging from buying fewer clothes, walking more, buying local groceries, being more mindful of energy use at home and recycling more.*

Supporting the environment through investing

For those with an active interest in sustainability, there is the opportunity to support the environment through investing choices, namely through ESG investing.

What is ESG?

ESG stands for Environmental, Social and Corporate Governance. Whereas traditional financial analysis considers only quantitative financial and economic data, Environmental, Social and Governance investing attempts to incorporate non-financial factors into the investment decision making process. ESG investing is therefore investing in companies that score highly within these areas, more specifically: 

Environmental: Companies who are mindful of the conservation of the natural world (eg. Carbon footprint, emissions) 
Social: Companies who are considerate of people and relationships (eg. Gender & diversity, human rights) 
Corporate Governance: Relate to the standards of how the company is run (eg. Political contributions, board composition)  

What are the benefits?

Investing in companies that have an interest in and are actively taking measures to be more environmentally, socially and corporately sustainable may resonate with you on a personal level and might reflect your own opinions and actions taken to be more environmentally conscious.

It is also an opportunity to potentially enhance the performance of your investments and achieve a higher rate of return. The analysis of ESG investing can be complex, however – it is not just about evaluating the products and services provided by a company, but also includes its behaviour, conduct, supply chain and various other considerations of running a business. It is also just as important to review a company’s future-looking strategies; how committed they are to achieving their standards and what their plans are to achieve and sustain them. It is therefore not considered advisable to formulate investment decisions based on purely backward-looking historical data – there is a need to take a more dynamic approach when considering ESG risks and opportunities.** This is the case with any type of investing; no one is able to predict the future and so we do not feel that past performance is a reliable indicator of future results (you can read more about that HERE). It is, however, more likely that a company that is well run, cares about the environment and its people (both customers and employees) will exhibit a greater level of resilience and outperform its peers than a company that does not.**

Popularity of ESG Investing

Investing in ESG companies is on the rise. Between January and October in 2020, £7.8bn was placed into responsible investment funds in the UK, according to trade body the Investment Association, which accounted for almost half of all net money placed into funds (47.5%).***

We believe that, with the increase of global environmental causes and people living more sustainably, the investments in ESG will continue to expand.

Please don’t hesitate to contact us if you would like to know more about ESG investing, how we select our ESG portfolios at JJFS, as well as our own investment philosophy.

 
 
 
Faith Liversedge