While making money is obviously a very important part of investing, in recent years there has been a shift in the priorities of some investors, towards more socially responsible investment strategies. But does that mean that sustainable impact investing is less profitable?
Sustainable impact investing doesn’t have to be a trade-off between doing the right thing and achieving long-term results. And businesses that commit to high standards of environmental, social and corporate governance (ESG) are often likely to have the brightest future.
Trusted wealth managers – including our St. James Place partners Rowan Dartington – understand the importance of responsible investing and can help construct a tailored portfolio from a range of responsible investments.
So, how can high earners invest in a way that has a positive impact on society and the environment, while focussing on what matters most to them?
What is sustainable impact investing?
Sustainable impact investing – or responsible investing – prioritises a business’s impact on the environment, alongside financial returns.
Investments are made in companies who have demonstrated they have a positive impact on the world, while avoiding those generally considered to be involved in harmful practices.
What are the drivers of sustainable impact investing?
Sustainable impact investing is growing in importance as a factor in investment decisions. Future financial decision-makers are asking more of companies and expect to see sustainable solutions. And over half (57%) of UK investors hold an ethical investment.
Generation Z (those born between 1997 and 2012) are the most likely to invest ethically (66%), with London (44%) having the highest level of ethical investors in the UK.
But it is not just the ordinary investor who is driving sustainable change, regulators and governments are also expanding their focus. For example all companies bidding for government contracts in the UK worth more than £5m a year, must commit to achieving Net Zero emissions by 2050.
And investment industry standards, such as the UN Principles for Responsible Investing, Sustainability Accounting Standards Board and Net Zero Asset Mangers Initiative, are all driving forward the message that responsible investing is here to stay.
Building a strategy for sustainable impact investing
When building your sustainable impact investments strategy, consider your personal investment needs and develop a plan that factors in issues such as your time horizon, tax status and appetite for risk.
ESG research and analysis can help identify potential investment risks. If investing responsibly, investors should consider negative as well as positive ESG factors. That means assessing the risks of continuing to invest in companies that are failing to respond to global concerns, along with investment opportunities with companies who are addressing them.
And it can be worth getting some trusted advice to ensure that the companies you are considering investing in are credible. The BBC recently revealed that a company receiving billions of pounds in green energy subsidies from UK taxpayers was actually cutting down environmentally-important forests.
When choosing investments for your sustainable impact investments portfolio, you will need to consider both individual companies and actively managed funds and tilt your portfolio according to what matters most to you:
- Investing in individual companies
Positive investments may be in companies involved in generating electricity from renewable sources, or those developing technologies that help reduce the amount of water used or CO2 emitted. Read more about these in our Green Investments article.
Conversely, those generally considered to be involved in harmful practices – such as companies that manufacture weapons, or that have large CO2 footprints – may be contrary to your strategy.
To help manage risk and capture a wide set of opportunities, invest in companies of all sizes across a wide range of industry sectors and global regions, as well as different asset classes.
- Investing in funds
When investing in funds, a strict search and selection process helps to identify those that meet agreed responsible investing criteria and that have the potential to deliver the most attractive returns over the medium to long term.
Investment funds could mean a mix of Global Equities, Fixed Income and Alternatives.
How we can help with your sustainable impact investing
However and whatever you want to invest in, Morrison Wealth can help plan your investment strategy. Whether you are looking for interesting investments , buying holiday homes or considering paying off a mortgage , we can help create a financial plan that works for you and incorporates sustainable impact investing into your goals.
We also work with our colleagues at Rowan Dartington (wholly owned by the St. James Place Group) to provide Responsible Investing Bespoke Portfolio Services, which are designed for those with specific investment requirements and preferences.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.