Is it possible to invest with conscience?
THERE is no doubt the topic dominating global conversations at the moment is the environment, with much of the debate centred on a need for a change in our attitude and behaviour.
With this rising tide of environmental, social and ethical awareness, does the world of investment have an environmental conscience?
The answer is yes. Environmental, social and corporate governance (ESG) investing, as it is known, has come a long way since its fledgling start in the early 1980s. Back then, all investments sat in the “traditional” investment spectrum, with little or no regard for societal impact. In those days, investment growth was the only factor for consideration.
Fast forward to 2020 and it's not to say that the vast majority of investments today aren't focused on financial return on investment, but the winds of change are heralding a new era with a surprisingly altruistic outlook. This has been a gradual development over the last 20 years.
The starting point for this shift was a trend towards “responsible” funds, which screen out any stocks which do harm to the planet and society. Weapons and tobacco are some obvious examples.
In the early 2000s, responsible funds paved the way for “sustainable” funds, which work to actively encourage planetary good – selecting to invest in businesses which support or drive pro-environmental initiatives. These funds have been attracting more funds and attention year on year.
But it was the arrival of “impact” funds in the mid 2010's which attracted the greatest interest. ESG investment reached new heights as investors sought out companies whose core activities have very clear environmental and society benefits.
These range from investments with a finance-first goal (ie delivering strong return on investment as a priority) through to investments with an “impact goal” first (ie environmental or societal good being the main aim, with financial concerns lower down the list of priorities).
If you're investing with an environmental conscience, chances are you'd like to think you can achieve the best of both worlds and this is a trend we have seen with the Barclays Multi-Impact Growth Fund.
It focuses on “finance first” investments which deliver positive ESG impacts. The financial returns generated from listed equities and bond funds which have a positive impact have performed well and in the two years or so since its launch, have seen a favourable performance compared to more traditional funds.
Looking into the future, there's no doubt that the human impact on the global environment is gaining awareness, momentum and activism – it's being referred to as the “woke” generation. This increased focus is likely to entrench further into investment considerations for individuals as they look more consciously into how their money is benefiting society, doing less harm or delivering social or environmental good.
For the investor, it's good news. By engaging with the right companies, and making considered choices, investors can make positive impacts, without giving up the financial gains that their investment portfolio needs to deliver for their future security and goals.
Impact investing looks set to rise in significance in the financial world over the next decade or two. It's a win:win and it doesn't require a compromise, just a bit of that bigger-picture thinking we all need to adopt as the current inhabitants of planet earth.
:: Claire McCombe is manager of Barclays Wealth & Investments in Belfast