Responsible investing in 2021: what will be most important E, S or G?
When it comes to responsible investing, the past couple of years have been dominated by the...
David Attenborough’s new film, A Life on our Planet, came to Netflix last weekend after showing briefly at selected cinemas. It’s an extraordinary – and frankly terrifying – witness statement about how quickly we have stripped the planet of its resources and the devastation we’ve inflicted on the nature around us.
And it has created quite a stir. Audiences have been left in tears, reviews are trending on twitter, and LinkedIn is full of people urging each other to ask their pension provider and bank about their investment in fossil fuels and to move money to places that invest in renewable and green technology.
“Without being too portentous on this, I think humanity is at a crossroads, and the natural world is really under serious, serious threat and the consequences could be apocalyptic,” Sir David has said.
A-list celebrities are getting in on the act too, backing a campaign by film director Richard Curtis (who also co-founded Comic Relief) and former Bank of England governor Mark Carney, which was launched in June this year.
‘Make My Money Matter’ is calling on the pensions industry to commit to net-zero carbon emissions by 2050, and for the Government to require that pension funds report on their emissions projections to 2050 and their alignment to the Paris Climate Agreement.
Also the maker of one of Julia Roberts’ best-known movies, Richard Curtis said that with pensions, “there’s an element that we’re in an Erin Brockovich situation – people don’t know what a company is doing, and the public aren’t aware of what is being done [with their money]”. In the film, Julia Roberts portrayed the true story of a woman who helped residents of a Californian town claim a multi-million dollar settlement from an energy corporation after groundwater was contaminated making residents ill.
Katherine Kroll, senior sustainability analyst at Brown Advisory, told us more about these types of environmental injustice in this recent podcast:
Richard Curtis has also said that this is the perfect time to launch such a campaign, and the success of the #MeToo and Black Lives Matter movements showed “that people are in the mood to change their behaviour and change the world”.
So how can you change your investments to help make the world a better place?
It seems many investors are already taking action. In the second quarter of this year, Rathbones says that ESG (Environmental, Social and Governance) fund flows were the equivalent to 1/3 of all European fund sales. Sustainability funds gathered 63% more money than traditional equity funds and UK-based ESG funds saw record inflows in July.
For those wanting to move their money, here are some Elite Rated suggestions:
The aim of this is twofold: to avoid unsustainable business practices; but also to invest in companies where there are problems to be resolved. The constraints include; no alcohol, gambling, pornography, weapons or tobacco, and the fund is fossil fuel free. There are also restrictions on environmental impact (with particular consideration to the Arctic & ecologically-sensitive operations), animal welfare, human rights and labour standards.
This a global equities fund invests in businesses whose products or services are making a positive impact on the world. To identify these companies, the team has six impact ‘themes’: environmental protection, the green economy, healthcare, innovative technologies, nutrition and well-being. And, in order to stay true to these themes, the team will also exclude companies that are causing harm, such as those involved in tobacco, weapons and fossil fuels extraction.
Launched in December 2019, this fund has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy, which means it is set to benefit from the massive tailwind of the some $2.4 trillion of annual spend required to meet global temperature goals. As well as avoiding creating carbon emissions, companies will also have to have at least 50% of their revenues from three sectors: renewable energy; efficient use of resources, and electrification.
The key differentiator of this fund is its’ use of the Planetary Boundaries framework. This framework identifies nine key environmental areas: climate change, freshwater-use, land-use, ocean acidification, nitrogen and phosphorous use, biodiversity, ozone depletion, aerosol loading and chemical pollution. Companies in which the managers invest must operate within the ‘safe operating space’ where human activities can take place safely.
The exclusion criteria for this fund are alcohol, animal testing, armaments, extraction of fossil fuels, gambling, nuclear power, pornography, tobacco and poor employment, environment and/or human rights practices. Each holding will also have to have at least one positive environmental, social or governance attribute. This is monitored through adherence to the UN’s Sustainable Development Goals.