Responsible investing is all about aligning your personal moral compass with your investment portfolio. The funds you choose and the companies you choose to invest in can not only have an impact on the financial value of an investment, but also on the world around us.
Responsible investing centres around ‘ESG’ which stands for ‘economic, social and governance’ – it’s assessing those three factors and the consequences of their activities in the world when it comes to investing.
To give you an idea of what ESG covers, here are some examples:
|Climate change||Child labour||Bribery and corruption|
|Deforestation||Employee relations||Board diversity|
|Plastic waste||Human rights||Tax affairs|
|Pollution||Modern slavery||Political lobbying and donations|
Being a responsible investor means investing your money with companies or institutions which consider the above ESG factors (amongst others) alongside your personal values and financial goals.
Let’s look at the ESG factors in more detail as to how they might relate to the investments you choose:
Environmental risks created by a company’s activities can have potential negative impact on air, land, water, ecosystems and human health, including waste and pollution, resource depletion, greenhouse gas emissions, deforestation and climate change.
Social risks refer to the impact that companies can have on society. These might include how a business looks after the well-being and rights of their people and communities – including working conditions, conflicts, health and safety, employee relations and diversity.
Governance risks concern the way in which companies are run. For example, how fairly they pay their staff, how diverse are their employees and board, what their tax strategies are and whether there are any cases of bribery and corruption.
Hopefully, this will give you a better understanding of the things to look out for when choosing particular investments and fund managers.
You should also:
Consider your personal values
Before embarking on any investment, decide what’s ethical for you and what areas of economic, social and governance you are really passionate about. Consider what industries you want (and wouldn’t want) to support to help you narrow down your choice of investments.
Doing this will help you choose investments in line with your principles.
When investing with us, we seek our clients’ personal views on responsible investment, and we openly share our processes and activity, so our clients are comfortable with their investment decisions.
Our fund managers maintain an ongoing discussion with companies in which they invest on financially material ESG issues. This includes:
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.