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Viewing posts categorised under: ESG investing

Fund managers, ethics, green issues and sustainability

By David Hattersley - Topics: ESG investing, ethical investing, Spain
This article is published on: 18th February 2021

18.02.21

The impact of both Brexit and the Covid 19 pandemic have given us all time to reflect on the world we live in. As consumers in the developed world, we are perhaps more aware of the impact we make on our planet. The words “Sustainable” and “Ethical” spring to mind.

So where does one stand on ethics and sustainability? As individuals, it’s very easy to say “we are Green”, but then travel 70km to stock up on our favourite brands of frozen convenience meals. Most of us, due to “lockdown”, now spend more time cooking and preparing our meals at home.

How far are major companies prepared to change too? Coca Cola has announced plans to make a paper bottle and already has a prototype that can be recycled, which was developed in the Brussels R&D centre. But, whilst that is a very applaudable, one company has gone even further.

I have to admit that there is an affection for them as I worked in one of their divisions for two years prior to a career change to Financial Services. One of the biggest global consumer companies which operates in 190 countries is Unilever. “Love or loathe it” to paraphrase Marmite, they have taken what some may consider a risky strategy. Not only do they try to ensure that the raw materials that go to make their products are as green as possible, they have taken what may be considered a leap of faith. Sustainability and ethics are not only about “green principals”. They are insisting that every part of its global chain of suppliers provide a “living wage”, and in some cases double that, by 2030. These include smallholder farmers as well major direct suppliers numbering in total 60,000. As the CEO, Alan Jope, said in a statement on the 21st Jan 2021, “The two biggest threats that the world currently faces are climate change and social inequality.”

ESG Investing

As part of a developed area of the world we should all make a choice. Do we support the ethics of a company that is looking to redistribute wealth and act in an ethical, sustainable way, or do we just look at price rather than value? Have the events of the last year been our wake up call? Morally, rather than just looking at saving tax, or short term political gain and expediency, we should consider what the real legacy is that we leave our children and grandchildren on this planet that we share.

The same questions will be applied by our fund managers, in particular those that focus on ethics, green issues and sustainability. Are they the best choices for the future? I believe so. These specialists have far greater resources than I could ever have to research this “new world” we are entering, and are better equipped to look at the longer term than I am. I would be happy to provide a portfolio of these specialist funds to anyone who is interested, so feel to contact me on any of the points raised.

What’s the story with ESG investing and what can it do for your savings?

By Barry Davys - Topics: ESG investing, investment diversification, Investments, Spain
This article is published on: 7th January 2021

07.01.21

ESG investing is now a mainstream type of investing and a useful part of a portfolio. But what is it and why is it good for me?

A year ago, someone came to ask for advice on moving investments from UK investments to Spain investment. We discussed their position, their requirements, their reasoning behind moving the money to Spain. All the reasoning behind the thought process was very sound. However, there were some practical aspects that I highlighted that needed addressing before making the move. The issues were taxation in Spain and their requirement for sustainable and/or responsible investments.

These people were really pleased with their investments with returns over 120% in 8 years. The increase in value in these funds had been so spectacular that there was a large capital gains tax liability in Spain if they were to sell. Also, the funds also still meet their belief in ESG values.My advice was for them to keep their investments.

ESG Investing

So what is ESG investing and why have the returns been so good? Why is it a good type of investing for the coming years? ESG is short for Environmental, Social and Governance. ESG investing is investing in the shares of companies that have good practices in these three areas.

An example of a company that would tick all three elements is a company that sells solar panels and a maintenance contract for them but does not charge for the electricity that the panels produce. Many of the established players in the market sell panels and then charge for the electricity in the same way as a normal electricity company.

This is my view, but charging for the electricity produced is wrong. The source of the power, sunlight, is free. Sunlight costs the seller of the solar panels nothing and should not therefore be charged to the panel buyer. Companies that sell solar panels without charging for the electricity meet the governance criteria. They also meet the environmental aspect because it is a renewable energy. These companies are now providing social benefit because they are setting up systems for communities, e.g. apartment blocks. They are a good example of a company that meets the ESG requirements.

Why is this good for your portfolio? When the “good” companies highlight that energy is free once you have bought their panels, sales will increase. We would all like free energy having bought the panels. Other recent ESG examples include Zoom and other companies that allow us to work from home (+400% share price increase in 12 months), Geely who owns Volvo, Lotus and other brands all converting to electric cars (+70.66%) and BlackRock Inc, the world’s largest asset manager who has just declared it is moving to ESG screening for every investment it makes (+41%).

BlackRock assets are $7.81 trillion as at 31st December 2020. They are joined, in varying degrees, by the following fund managers in ESG vetting of and investing in companies with ESG credentials.

  • Fidelity
  • JP Morgan Asset Management
  • Morgan Stanley
  • PIMCO (World’s biggest bond fund manager)
  • Vanguard $6 Trn fund manager

This is a small number of the fund managers that have declared their intentions to invest in ESG assets. Are they doing this because of a collective social consciousness? They may tell us that, but the reality is the companies that can be classed as ESG are often the companies of the future. This is where the growth is and with this much collective demand from the above managers and more the sector will be well supported.

At Spectrum we believe in the benefits of ESG investing; it goes alongside our support of a number of charities. However, we also believe in it as a method of adding future value to our clients’ investments.

If you have a question about ESG investing and would like to discover more, please feel welcome to get in touch. We are also happy to review your investments to see how you can incorporate ESG investing into your savings.

You can be an ESG investor today!

As individuals, you can join the ESG movement.