Ethical Investing.
More and more these days, people want to approach their investment decisions from an ethical standpoint. We understand what it takes to maximise your financial position without compromising on your ethical standards.
Ethical Investing is a growing area of investment. Over the last few years, it has moved from being a relatively niche area of investing to become a key area of consideration for investors. At Integra, we understand what it takes to invest ethically. We can discuss this with you in detail. But you can find out more about this area if investment below.
A recent survey in the UK found that over three-quarters (77%) of Brits who intend to invest, are likely to consider investing ethically.
Ethical Investing. Explained.
Ethical investing is a term that broadly refers to three different categories of approaches to investing which we will explain. Whilst some people use the terms interchangeably, there are distinct differences in approach and outcomes. And that will affect how your portfolio is constructed and which investments may be considered suitable for each approach. They are:
- Environmental, Social and Governance (ESG)
- Socially Responsible Investing (SRI)
- Impact Investing
Environmental, Social and Governance (ESG).
ESG refers to the environmental, social, and governance practices of an investment that may have a material impact on the performance of that investment. The integration of ESG factors is used to enhance traditional f inancial analysis by identifying potential risks and opportunities beyond technical valuations. While there is an overlay of social consciousness, the main objective of ESG valuation remains financial performance. There are a number of factors that go into ESG investments. It should be noted that investments with good ESG scores have the potential to drive returns, whilst those with poor ESG scores may inhibit returns.
Environmental
considerations
- Energy consumption
- Pollution
- Climate change
- Waste production
- Natural resource preservation
- Animal welfare
Social
considerations
- Human rights
- Child and forced labour
- Community engagement
- Health and safety
- Stakeholder relations
- Employee relations
Governance
considerations
- Quality of management
- Board independence
- Conflicts of interest
- Executive compensation
- Transparency
- Shareholder rights
Socially Responsible Investing.
Socially Responsible Investing goes one step further than ESG by actively eliminating or selecting investments according to specific ethical guidelines. This could be due to an investor’s religion, personal values, or political beliefs. Unlike ESG analysis which shapes valuations, SRI uses ESG factors to apply negative or positive screens on the investment universe.
For example, an investor may wish to avoid any mutual fund or exchange-traded fund (ETF) that invests in companies engaged in firearms production because they hold anti-conflict beliefs. Alternatively, an investor may opt to allocate a fixed portion of their portfolio to companies that contribute to charitable causes.
Other negative SRI screening factors include:
- Alcohol, tobacco, and other addictive substances
- Gambling
- Production of weapons and defence tools
- Terrorism affiliations
- Human rights and labour violations
- Environmental damage
Impact Investing.
Impact or thematic investing places the positive outcomes as the consideration of utmost importance, meaning the investments need to have a positive impact in some way. So, the objective of impact investing is to help a business or organization accomplish specific goals that are beneficial to society or the environment. Investing in a non-profit dedicated to the research and development of clean energy, regardless of whether success is guaranteed, is an example.
What does this mean for you?
Despite them often being grouped together, ESG, SRI and Impact investing are very different strategies. There is a significant difference in the emphasis placed on the outputs from these types of investment, with ESG being most closely aligned to a ‘traditional’ investment mandate of achieving maximum returns for a given level of risk (while still incorporating progressive beliefs) through to impact investing where the clear focus is on the suitability of the inputs and selecting companies solely on their likely societal benefit, even if this comes at a cost to the returns generated for the investor.
It is our role as your adviser to discuss your personal investment philosophy, your financial objectives and to work with you to ensure you access a portfolio that is tailored to your requirements. A good starting point is understanding these terms and being able to discuss each option with your adviser so they can find the best fit for your circumstances and beliefs. What we are sure of is that no-one should switch all their investible assets into one class of investment or into one sector. Investing in ESG, SRI or Impact should be seen as a diversifier, whilst benefiting society, the environment and enhancing governance.
Don't just take our word for it.
The initial advice I received from Integra was first-class. But, more than that, the service was truly impeccable. I immediately felt at ease with my adviser and knew that I was talking to the right people. This initial feeling of safety and security has been borne out in any conversations we have had since. I cannot recommend them highly enough.
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