We all want to help and play our part in the battle against climate change, but many people feel this is a job for the billionaires of the world who could (and should!) use their money to influence the way companies do business for the better. Alas, the power you hold in your hands is greater than you know!
Investment fund managers make investment decisions that impact millions and millions of investors’ money every day. A significant shift in their world has been the demand from investors to use their money for good. Not to say their money was ever used for evil (!), but now there is a real power in the hands of investors to make sure companies who want to stay in the good books of fund managers behave as they should and make the necessary changes to improve their carbon footprint in this world.
This is categorised across 3 key areas; Environmental, Social, and Governance (ESG). ESG investing has developed significantly over recent years. Initially, it was ok to simply exclude “sin stocks” such as stocks in the tobacco industry or connected to warfare. Today, there is a much broader scope of issues that impact a company’s ESG score:
There are many examples of the impact of this in recent times within the investment world. Some large household company names have been booted off the books of influential investment firms because they are not meeting the ESG expectations. As this is becoming more widespread and known, the decisions made by stakeholders are now greatly influenced by the affect it will have on their ESG score. Given there are very few areas within a business operation that are not relevant to ESG, and given the reliance on outside investments for so many global companies, you can see how future behaviours and decision making of these large corporates around the world can be changed for the better by you and me.
Why has this become such a phenomenon in recent times? Looking at the statics, it’s quite alarming that it hasn’t been an investor’s priority for much longer. The good news is there are now global investment firms and teams actively helping companies with how to improve their ESG scores. There is a definite shift towards stakeholder decision making that encompasses more than just bottom-line profits now and I for one am on-board. It’s nice to make money, but it’s better to do it the right way too.
“How can I help?”, I hear you ask. Well, investing is a fundamental part of any healthy financial plan. If you haven’t started yet, you soon will. My message to you is not to jump into it without asking the right questions. Talk to us about what your options are. If ethical investing is important to you, make sure you know what your money is getting into.
