Going Green?

A growing trend in today’s world is the emphasis on environmental concerns. With continual educational improvements around the topic of how our presence is affecting our planet, many of our decisions and attitudes are now shaped by considerations of what is “eco-friendly”.

This environmental focus is becoming increasingly common in a wide range of industries – from green household products and cosmetics, to cafes promoting fair trade coffee and even environmentally sustainable building design.
‘Green’ investment is another area which is gaining momentum. Also known as ‘ethical investment’, ‘responsible investment’ or ‘sustainable investment’, these terms are often used interchangeably but have subtle differences.

Ethical Investment

Ethical investments is concerned with fulfilling a social conscience, and will often avoid certain parts of the market that could potentially be harming people (e.g. tobacco companies).

Responsible investment

Responsible investment incorporates various environmental, social and governance (ESG) issues when evaluating options.

Sustainable investment

Sustainable investment is interested in business models which have policies and procedures in place that are viable for the long term.

Environmental or Green investing

This is similar to ethical investment, but specifically seeks businesses which are offering positive solutions to environmental problems, including water, waste and energy.

 

A Complement to Other Investments

It is important to note that these approaches are considered in addition to the usual investment selection and management process. Various factors may determine what investment is most appropriate for you, depending on where you place importance.

Criteria may include the company’s management and culture, their governance and ethics, their attitude towards pollution and carbon emissions, as well as their internal health and safety, human resources, quality control etc.

In the past, many doubted Green investing, believing it involved sacrificing higher returns for the peace of mind achieved by acting in a socially responsible way. However,  some people are now convinced of a link between a company’s commitment to sustainability, and their longer term profits.

Why are some people attracted to Green investing? There can be numerous reasons, including:

• the desire to invest in companies that share similar values
• the opportunity to make a positive impact on the environment and climate change
• the ability to demand greater accountability from the company on ethical and governance issues

There are many options for investors who wish to incorporate a green friendly approach into their investment strategies. There are financial products offered across most asset classes, and investors have the choice to target specific companies who adopt various approaches or use specialist managed funds.

The Responsible Investment Association is an industry body that helps professionals, individuals and organisations learn more about how they can make investment choices that take environmental, social, ethical or governance issues into account, as well as financial objectives.

For more details, visit www.responsibleinvestment.org.

 

Superannuation

If Superannuation is your current focus, it’s interesting to note that many super funds also offer sustainable investment options.

As with any fund you are considering investing in, it’s crucial to thoroughly research the key principles and values to ensure they are consistent with your views. If ethical considerations are an important aspect of your investment, ensure you investigate how the company defines this as there are currently no exact definitions so details should be examined closely.

It is becoming increasingly common for individuals to incorporate their world, its people and the environment in their everyday decisions. Furthermore, people are placing an importance not just on their monetary return, but also considering how their investment can make a positive impact on the community and the world as a whole.

Whatever your view, Green investing is an interesting concept, fuelled by consumer demand to discover alternate means to both save and make money in a more environmentally sustainable way.

For more information on Green investing or if you would like to find out what eco-friendly investment options may be appropriate for you, please contact your Adviser.

Source: Capstone Financial Planning.