Punter Southall Financial Management
The Era of Responsible Investing
Many people would like a sustainable, greener and cleaner future, and investors are now realising that their funds could assist in encouraging this. The question we’ve been asking clients is ‘how do you want your money to make a difference to the world?’.
If our clients do have specific ethical and moral views, we believe it is important to ensure that these are considered in the recommendations we provide. Sometimes individuals find it difficult to outline clearly what their ethical and moral views are, as they are often not clear cut. We believe the decision to invest responsibly shouldn’t be considered in isolation, and that clients should consider how they live their day-to-day lives. Questions they may ask themselves should may include:
How do you feel regarding energy usage? Do you drive an electric car and use renewable energy such as solar panels?
How do you engage with the sustainability of natural resources? Do you re-use carrier bags and have you swapped disposable coffee cups for flasks?
How strongly do you feel regarding the transparency of company supply chains? Do you shop for local and organic products?
These small decisions help to determine the strength of moral and ethical views, and an investment portfolio can then be tailored to incorporate their wider values, emotions, priorities and aspirations accordingly.
It is important for investors to understand the differing approaches and adopt a style or a mixture that best suits their objectives. Their preference may be to take a negative screening approach and ensure certain assets are excluded from the portfolio — for example alcohol, pornography, gambling etc. Alternatively, they may prefer a positive inclusion approach and ensure investments are made into companies with positive business practices, strong Environmental, Social, Governance fundamentals and which contribute to addressing sustainability challenges as well as the potential for strong financial returns.
The government is increasingly supporting sustainable solutions and innovation which has created a positive framework for businesses to engage with good corporate practices and sustainable operations. A common misconception has been that opting for a responsible portfolio will dampen the potential returns and could even result in a lack of diversification within. Our ongoing research into the responsible investment mandates prove this is not the case. Psigma Investment Management offer responsible portfolios which are well-diversified and achieve good risk adjusted performance. Clients no longer need to compromise on future returns in order to invest responsibly.