"Around the world, 22nd April is Earth Day – a day to think about how we can all do more to help our amazing planet overcome the enormous challenges it faces."
Please be aware the below blog is older than 12 months, therefore the information may not be relevant or up to date.
From a financial perspective, considering the environmental, social and governance (ESG) impacts of our financial decisions is a really powerful way for us all to ‘invest in our planet’ – not just on Earth Day but every day.
Investing in ESG has risen in popularity over recent years as investors see not only the financial returns it can bring but perhaps, even more importantly, the tangible impact it can have on the world around us. There are an increasing number of ways of choosing ESG funds depending on individual preference, below are just a few:
- Positive screening – actively concentrating on investing in companies with a good track record on ESG issues or those that operate in ESG sectors such as renewable energy
- Negative screening – deliberately avoiding companies that are known to have a poor track record in ESG areas
- Transition investing - supporting companies that are looking to shift away from having harmful business practices to become a company that helps drive the shift to a more sustainable global economy
- Best in class – investing in the company in a given sector that leading the way based on ESG criteria
Whatever your approach, ESG investing can make a real difference, not only to your personal wealth but also to the planet as a whole. Just last year, Money Marketing1 reported that switching a £100,000 pension pot into a sustainable fund could save as much as 64 tonnes of carbon each year – that’s the equivalent of nine years’ worth of an average UK citizen’s carbon footprint!
And, in case you were wondering about the impact to your bottom line, ESG investments perform as well, if not better than other non-ESG investments. In 2020 Morningstar2 reported that ‘on average, 77.3% of sustainable funds available to investors 10 years ago have survived, compared with less than half (46.4%) of traditional funds. Additionally, the average annual return for a sustainable fund invested in large global companies has been 6.9% a year, while a traditionally invested fund has made 6.3% a year. Alongside this, Morgan Stanley3 released research in 2021 which reported ‘sustainable funds outperformed traditional peer funds and reduced investment risk during coronavirus in 2020’. Their research showed that sustainable equity funds outperformed non-ESG peer funds by a median total return of 4.3 percent in 2020.
At Ginkgo, it’s important to us that our business makes a positive impact on the people and places around us. Grow with Ginkgo is our way of giving back by nurturing our local environment for the benefit of everyone. It’s also why ESG plays an important part in our investment strategy. Every solution on our investment panel has been independently scored for ESG performance at a company and fund level. We take time to understand your feelings towards responsible investment and make recommendations that align with them.
If, during your annual review you wish to discuss ESG Investments and including them within your portfolio, I would be delighted to assist but I must point out that as with any type of investment, the value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
By Daren Wallbank
Past performance is not a guide to future performance.
The value of investments can fall as well as rise. You may get back less than you invested.
1 https://www.moneymarketing.co.uk/news/greening-pension-most-effective-action-against-climate-change/
2 https://www.morningstar.co.uk/uk/news/203214/do-sustainable-funds-beat-their-rivals.aspx
3 https://www.morganstanley.com/ideas/esg-funds-outperform-peers-coronavirus
