Recent figures published by Professional Adviser confirm the continuing growth of ESG investments – those concerned with environmental, social, and governance issues.
Analysis of PortfolioMetrix’s Sustainable World portfolio confirms that it outperformed its non-ESG counterparts over the last five years. Whilst future performance cannot be guaranteed, more and more people are seeking investments that align with their values.
This is great news if you are looking to align your money with your values, investing in a socially and environmentally conscious way without sacrificing returns.
You might consider using Hartsfield’s Responsible Portfolios – aligned with the UN’s Sustainable Development Goals – to do just that.
Here’s how responsible investing can help make your long-term financial dreams a reality and the ESG trends you can expect to see in the year ahead.
Increased inflows and high confidence in returns looks set to continue into 2022
Last year, we asked: What will 2021 bring for ESG investing? and concluded that climate change and social injustice would remain centre stage as the ESG landscape matured after a bumper 2020.
2020 was the year that responsible investing went mainstream. The Investment Association confirmed that more than £7 billion was placed in ESG funds in the first 10 months alone. Not only did inflows improve, but old myths were exposed too.
A recent study by Close Brothers found that 85% of respondents now believe that investing sustainably will either improve or provide the same returns as traditional investing.
What sort of returns will sustainable investing bring?
Source: Close Brothers
Scepticism is strongest among the over-55s, with nearly 40% of respondents in this age group believing investments aligned to their values on sustainability could limit returns. This compares with less than 10% of those aged 18 to 24.
Confidence and commitment to ESG among younger investors is a strong indicator of its continued strength for 2022.
Achieving net zero carbon emissions by 2050 won’t be easy
In 2015, the United Nations (UN) announced 17 Sustainable Development Goals (SDGs) aimed at ending global poverty, advancing health and education, reducing inequality, protecting the environment, and accelerating economic growth.
The UN’s goals on climate change are clear – to reduce emissions by 45% from their 2010 levels by 2030, and to reach net zero by 2050.
Back in October, the Guardian reported that the fifth-largest pension fund in the world would soon stop investing in fossil fuels. ABP, the Dutch fund for civil servants and teachers, confirmed it would be selling €15 billion of investments in that sector.
Elsewhere, recent research published by Money Marketing found that switching your average-sized pension pot to sustainable funds could have a huge impact on the environment, saving around 19 tonnes of carbon a year. A pension pot exceeding £100,000 could save 64 tonnes of carbon each year, simply through a move into sustainable funds.
The report looked at the environmental impact of the choices we make and found that “greening” your pension could be 21 times better for cutting your carbon footprint than giving up flying, becoming vegetarian, and switching your energy provider combined.
While its impact on carbon emissions could be huge, switching your pension provider is not a decision to be taken lightly.
Speak to us before you make any decision and also remember that there are other ways to make your money work for the environment, including by moving your non-pension investments into Hartsfield Planning’s Responsible Portfolio.
You might consider government-backed NS&I green bonds
You can read your guide to NS&I green bonds here, where you’ll find information about:
- How the government-backed bonds will invest your money while funding “green” projects designed to help the UK achieve its zero net emissions targets
- The fixed-interest bond’s 0.65% interest rate, its three-year term, as well as who can take one out, and when
- Why it always pays to shop around for the best available rate and speak to the experts before making a final decision.
“Greenwashing” and how to look out for it
Another trend sure to be important in 2022 is transparency and the continuing issue of “greenwashing”.
Greenwashing is the process by which companies attempt to attract sustainable and responsible investors by exaggerating their ESG credentials.
Last year, we included tackling greenwashing in our list of trends for 2021.
A recent report from the American finance company MSCI suggests that “today’s investors wrestle with confusing ESG terminology, definitions and labels.” As we look ahead to 2022 there is still work to be done to regulate processes and tighten definitions.
As ESG fund ratings and improved definitions of key concepts emerge, the issue of greenwashing should fade, helping to ensure you and like-minded investors can place their money with confidence.
Get in touch
If you would like to discuss investing in Hartfield’s Responsible Portfolio and any other issues around your investments and ESG matters, please get in touch and find out how our team of expert planners can help.
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.