Environmental, Social and Governance (ESG) Investing

What Is Socially Responsible Investing?

Environmental Socially Responsible Investing has grown from a niche sector to a now more popular Investing avenue. This type of Investing specifically selects responsible businesses that try to make a positive difference. While ethical investing has been around for some years, ESG goes deeper. It doesn’t just avoid companies such as arms dealers and tobacco manufactures, ESG asks bigger questions. How much plastic are these businesses producing? Are they having a positive impact on the environment?  These questions and more help Investors focus on organisations that are truly ethical. Each pillar of ESG (Environmental, Social and Governance) cover unique issues.

Environmental

Environmental factors can cover a wide range of factors including their effects on climate change, deforestation and energy efficiency. Research into how reliant companies are on fossil fuels and whether it is meeting government regulations

Governance

Governance factors can include standards such as bribery, corruption and political contributions. Not only are these factors worth considering for ethical values but they can also hold a key insight into a how likely it is for a company to succeed. 

Social

Human rights, customer satisfaction and data protection will fall under the social category amongst others. It investigates whether the business involved benefits society. 

Should You Consider ESG Investing?

ESG Investing is about making sure your Investment choices align with your priorities by allowing investors to make more ethical decisions when it comes to Investing. 

In recent times we have seen strong performance from many ESG Investments. In 2019 Morgan Stanley released a white paper showing that between 2014 and 2019 there was little difference in ESG Investments compared to traditional funds. Additionally, they found that ESG Investments may offer lower market risk. It is however worth considering that ESG Investing does limit the amount of investment opportunities as these investments will only consider companies who meet specific criteria. 

The Growing Interest In ESG Investing

There has been a clear increase in demand for ethical Investments. As people in general become more aware of our effect on the planet amongst other factors, this trend shows no sign of slowing down. 

The research from the Investment Association shows the assets under ethical investment accumulated to £16 billion in 2018 within the UK, a 68% increase from £9.5 billion in three -year period. With ethical investing entering the mainstream, ethical values are becoming increasingly important among investors and all companies will start to incorporate more ESG factors to maintain or gain investor financing

How To Invest Ethically

Your Financial Adviser will be able to talk you through various options when it comes to ESG Investments. At Chadwicks, we offer a free initial consultation to explain the different avenues when it comes to ESG Investments. 

The Chadwicks ESG Portfolios are available for clients who wish to incorporate ESG considerations into investment decisions without looking to sacrifice returns. There are five risk graded portfolios ranging from cautious to adventitious. The Chadwicks ESG portfolios are mainly constructed with ethical funds investing in stocks contained in regional MSCI SRI Indexes.

The methodology behind the MSCI SRI Indexes is to target companies with the best ESG score across different sectors, meanwhile excluding businesses with high negative social or environmental impact from the selection universe (MSCI benchmark indexes/parent indexes) covering all liquid and investable securities.

Next Steps

Chadwicks IFA offer a free initial consultation to help you find out if ESG Investing is for you. You can arrange yours by completing the below form. 

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