ESG-Investing: Mythbusters

By Nick Adamthwaite

Mythbusters

In today’s world of social media and the web, it's often hard to separate the facts from the fiction. Just because we hear something often doesn’t necessarily make it true. For example, have you ever heard a goldfish only has a 3-second memory span or that lightning never strikes twice? Both these things have been scientifically proven as untrue and yet people still believe them.

When it comes to investing, there are many misconceptions out there. One of the areas that are often misunderstood is investing to help people and the planet. There are ways to give your money a chance to work harder whilst also helping to create a better world. We want to address some of the common questions and confusion about this. It may be for you, it may not, but to make that decision – it's important to know the facts.

Does investing for good only help the environment?

While the environment plays a huge part in ‘investing for good’ it is not the only focus. Firstly when we say environment it covers a wide spectrum from climate change, finding environmental solutions to tackling the huge amount of waste in today's world with a circular economy. Secondly investing for good aims to tackle some of the most pressing issues facing society. This ranges from diversity and inclusion within society and workplaces, better work and education and better health which saves lives.

Investing for good looks to invest in companies proactively finding solutions to these challenges whether that is advancements in medical treatments or bringing education to smaller communities in remote locations.

It goes way beyond ‘just the environment’.

Does investing for good give poorer returns?

A survey by the Global Impact Investing Network (GIIN)* shows that an overwhelming majority of people who took part reported their impact investments as meeting or exceeding their financial expectations.

The same survey also goes on to show that over half of the impact investments looked at resulted in competitive returns.

The idea that you can’t make money whilst doing good is simply wrong.

Of course, as with any investment, it can go down as well as up and you might not get back what you put in. It's also important to know that past performance Is not a guide to the future.

Is it too risky?

All investments have a level of risk, but there’s no reason why investing to help create a better world would mean your money was at greater risk than investing in something else. A common misconception could for example be that all companies with big dreams about saving the world are risky startups with no profits. This simply isn't true. In fact to the contrary often it can be large industry-leading companies – that can have positive outcomes on society and the planet.

An adviser will always talk to you about the level of risk you are willing and comfortable taking as well as how much money you can afford to lose.

Is ‘investing for good’ a fad?

The ideas behind investing for good are not new, but there has been a surge in demand for funds that invest to help the planet. Based on data from the Global Sustainable Investment Alliance, the amount invested in sustainable investments globally is more than US$30 trillion.

Sustainable investing is becoming more popular with societal shifts such as the mass rejection of single-use plastic and climate change warnings.

The importance of looking after our planet and society is becoming a movement with the younger generation and is only set to continue.

--

*GIIN Annual Impact Investor Survey, 2020

Awards

Let Us Help