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Sustainable Investing

This is a word we are hearing a lot recently, not only because it is on the FCA’s agenda and COP26 but because it is becoming more important to us and the future of our society. Fund managers are proactively taking an approach to integrate ESG considerations throughout their funds. And companies are getting pressure to do things in the right way. But what does it actually mean?

ESG stands for…

 

  • Environmental Factors

These refer to how companies are positively taking an approach to better our environment – carbon footprint, energy consumption, greenhouse gas emissions, depletion of resources, waste and pollution and deforestation.

  • Social factors

These refer to relationships, how a company treats ‘people’ – human rights, working conditions, employee relations, health & safety, and diversity.

  • Governance factors

These refer to the leadership of a company. – board diversity, structure, pay, anti-bribery & corruption, management, culture, and their tax strategy.

 

And it doesn’t just stop there, it goes deeper than that. Broadly there are 3 investment approaches

  • Avoid or negative screening, this means that the fund(s) you are investing in simply remove any companies that undertake undesirable activities (arms, tobacco, fossil fuels etc)
  • Support, this is where investments target a specific theme, for example a company that delivers a positive outcome in reducing their carbon footprint.
  • Influence, this is where you want your fund manager to engage with companies to influence their sustainability and improve their business practises.

So what should you consider…

  • What is important to you?
  • What difference would you like to make?
  • Are there specifics and do you want to avoid, support or influence?

If you would like to know more, speak to your Financial Adviser who will be able to give you more information.

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