>
Floods in Pakistan, a devastating hurricane in Florida and heatwaves across Europe this summer have sharpened — for some investors — where their money is going.
Fund managers have made a concerted effort to drive investment in companies that focus on ESG – environmental, social and governance issues.
However, three in five have never heard of ESG investing and a third of investors are unfamiliar with it, according to a report by investment giant Fidelity.
That’s not to say there’s no appetite — nearly half of investors say they want their money to have a positive impact on the world.
Nearly half of investors surveyed by Fidelity want their money to have a positive impact, with climate change at the top of their list of concerns
Fidelity’s research shows that climate change tops the list — 56 percent — of the problems people want to tackle, rising to 67 percent for those over 55.
Other prominent themes include poverty and homelessness – 37 percent – and the fight against unsustainable consumption – 32 percent.
Despite the interest, only one in five choose to invest in sustainable companies or funds.
About 30 percent of Fidelity surveyed said the events of the past year had prompted them to invest more sustainably or save their money.
For investors aged 18 to 24, this rises to 42 percent.
Emma-Lou Montgomery, of Fidelity International, said: ‘Our recent research highlights the importance of connecting people’s enthusiasm for sustainable causes with the practical steps they can take to align their finances with their values.
“With relatively low awareness of the options available, there remains a significant proportion of people who want their money to have a positive impact, but currently don’t know how to do it.”
How do you start saving sustainably?
ESG investing can be a daunting prospect. Many funds have turned around and started investing in companies involved in renewable energy or healthcare and call themselves sustainable. But a look under the hood and it gets more complex.
If you are a beginner, where do you start?
Emma-Lou Montgomery of Fidelity outlines her three steps for investors who want to save sustainably.
1. View the fund sheets of your current investments
If you want to know how ‘green’ your portfolio is, you should first look at the factsheets of the funds in which you currently invest.
These provide an in-depth understanding of the fund, including information on top positions, regions and sustainability ratings and characteristics.
2. Ask yourself what your goals are
When assessing your current investments, you should consider whether you personally agree with the companies in which the fund invests – for example, whether there are certain companies or industries that you would like to exclude completely – and/or whether there are cases to be demonstrated in which they have held companies accountable through engagement and voting activities.
The answers to these questions should inform both your mind and your heart so that you can decide whether the fund is right for you.
3. Consider your risk appetite – and regularly evaluate: As you would with any investment decision, it is worth reviewing your holdings in the context of your overall investment objectives, bearing in mind how any decisions you make could affect your risk appetite and the time you spend plan to remain invested.
Finally, as the world around us is constantly changing, it’s worth regularly reviewing your sustainable investments to ensure they continue to match your preferences and fit your goals.
In what kind of companies do sustainable funds invest?
If you are a more experienced ESG investor looking to build your portfolio further, there are plenty of funds offering investments in largely untapped sectors.
Asset manager EQ Investors offers a range of solutions for investors who want to invest sustainably. The EQ Positive Impact Portfolios invest in companies and funds that have a positive impact on society, not just the environment.
The team examined the types of companies in which sustainable funds invest, including in health, recycling and railways.
For investors unfamiliar with the ins and outs of ESG, an artificial heart may not be the first thing that comes to mind.
Abiomed develops and manufactures medical technologies and the heart pump, used during surgery or after a heart attack, has been used to support more than 210,000 patients worldwide.
The company has received investment from the Baillie Gifford Positive Change fund, which invests in companies that fit into four themes: social inclusion and education, environment and resource needs, health care and quality of life.
Clinical studies show that Abiomed’s heart pumps lead to fewer days in hospital, fewer return visits and a faster return to normal life.
Wellington Global Impact Bond Fund takes a more traditional approach with its investment in recycling company PureCycle.
The project, backed by a green bond issued by the Ohio Port Authority, has been operational since late last year. The goal is to dispose of waste from landfills in the US and convert approximately 54,000 tons of plastic waste into plastic pellets.
While electric cars and bicycles have soared in popularity, innovation of other modes of transportation has largely remained under the radar.
Rail is one of the most energy-efficient modes of transport and is responsible for eight percent of passenger traffic and nine percent of freight traffic worldwide.
Janus Henderson Sustainable Global Equity Fund aims to capitalize on the opportunities offered by the rail sector through its investment in Wabtec.
The company focuses on freight and passenger transport by rail with a focus on energy efficiency, fuel consumption and minimizing waste. Last year, Wabtec operated the world’s first 100 percent battery-electric heavy locomotive.
Some links in this article may be affiliate links. If you click on it, we can earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.