The first Earth Day was held on 22 April 1970 as a response to an “emerging environmental consciousness” in the US. Half a century later, it has become the world’s largest recruiter to the environmental movement, with 150,000 partners in 192 countries.
The theme for this year’s series of events is “invest in our planet”.
You can use your wealth to support environmental change or to directly fund green projects here in the UK. You might consider switching your funds into responsible or ethical portfolios or look for those funds with the best record where environmental, social, and governance (ESG) factors are concerned.
Keep reading to find out how to align your money with your values, and the difference doing so could make.
The rise of environmental consciousness
Earth Day took its original inspiration from Rachel Carson’s 1962 environmental science book Silent Spring. More recently, however, it is figures like David Attenborough and Greta Thunberg who have been at the forefront of climate change protests and reform.
We now understand the impact our actions have on the planet – arguably, more clearly than ever before.
You might have taken simple steps to reduce, reuse, and recycle the products you buy. Maybe you’ve turned to veganism or bought an electric vehicle?
You can also make green choices with your money. Once that meant simply avoiding “sin” stocks like those in tobacco or arms manufacturing companies. According to a recent article in the Guardian, however, this principle of “Do no harm” has been joined by a new ethos: “Do good”.
You can now invest in a way that centres on environmental, social and governance issues, as well as using your money to directly fund green projects in the UK.
ESG investing promotes more than just environmental issues
ESG investments are those that focus on companies with a proven record in environmental, social, and governance issues.
They may be committed to:
- Using renewable energy in their manufacturing processes, managing carbon emissions, or promoting green initiatives
- Having gender equality and diversity across their workforce, a good human rights record at their bases around the world, or paying fair wages
- Demonstrating transparency in how their board is selected or a good record on corruption and executive pay.
Fund managers and investors can approach ESG issues in different ways.
Positive screening
This means concentrating on those companies with a good record on ESG issues or that operate in environmentally aware sectors like renewable energy.
Negative screening
Negative screening means avoiding companies that don’t have a good track record in ESG areas, such as companies with poor relationships in their local community, gender inequality in the boardroom, or a large carbon footprint.
Best in class
If you are looking to invest in a particular sector, best in class investing would mean choosing the leading company in that sector based on ESG criteria.
Aligning your investments with your values can make a real difference
Investing responsibly can make a huge difference. Money Marketing reported in 2021 that switching a £100,000 pension pot into sustainable funds could save around 64 tonnes of carbon each year.
That makes switching your pension to green funds 21 times more powerful for reducing your carbon footprint than stopping flying, becoming a vegetarian and moving to a renewable energy provider combined.
Investing with ESG factors in mind doesn’t mean sacrificing returns
Switching your funds to ESG, sustainable, or ethical investments doesn’t mean sacrificing returns either.
News agency Reuters recently confirmed that 2021 had been a record year for ESG funds, with $649 billion of inflows worldwide to November. The MSCI’s ESG index (World ESG Leaders) rose by 22% during the same period, compared with a gain of just 15% for their non-ESG alternative.
Get in touch
Climate change, the effect of extreme weather, and issues of social injustice mean that ESG will continue to make headlines in 2022.
If you’d like help aligning your money with environmental, social or governance issues, contact us now.
Get in touch by emailing hello@fingerprintfp.co.uk or call 03452 100 100.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
