What is ESG Investing?
ESG stands for Environmental, Social and Corporate Governance. ESG Investing is a strategy of making fund selections based on a company’s positive contribution to society. Over the last few years, an increasing number of investors have chosen ESG investments. Growth in this type of investing is predicted to continue. A recent report by the Investment Association concluded that over £1 billion per month was invested into ESG funds in 2020.
Following a boom of interest in the environment and social factors, investors are now more than ever looking to put their money to work in companies that score highly in these areas. Similarly, many individuals actively avoid investment in so-called ‘sin stocks,’ such as those in the tobacco, alcohol or firearms industries.
ESG Investing has seen great strides in recent years with advancement in technology and the ingenuity of the entrepreneurial community to commercialise ideas which may have seemed pure science fiction in the past. And it is by no means only smaller and niche firms who can offer solutions of this nature would-be investors, with more traditional asset managers recognising the appetite for this ever-increasing area of the market which we are ideally placed to access on behalf of our clients.
Does allocating funds according to your conscious and moral compass necessarily mean you compromise the potential for competitive outcomes? We think not and have expertise in designing, implementing, and reviewing appropriate portfolios of a nature where you can sleep soundly at night.
Traditionally, the belief has been that choosing to invest sustainably comes at the expense of higher returns. This was something that many investors could readily accept. They prioritised contributing to positive change over maximising portfolio growth. To a large extent, this depends on how strict the investor wishes to be when selecting funds. Typically, the most active companies in terms of the environment or social factors are younger and smaller when compared to most companies on the stock market. Smaller companies are historically associated with higher costs of investment and larger volatility.
Like all investment opportunities, it is imperative that the appropriate due diligence and research takes place to ensure where possible that where your hard-earned money ends up stands to reason. The good thing is we have the capabilities to provide this oversight both initially and over the course of our relationship, thus meaning you don’t unnecessarily sacrifice your capital simply to maintain your convictions.
At Holyrood Asset Management, we understand that every client has different beliefs, and we are here to help our clients to match those beliefs with their investments. As part of our initial meeting with you, we will gauge your views on ESG Investing and then use this when selecting your recommended investment strategy.
If you would like to find out more on ESG investing, please contact us, where we will be more than happy to answer any questions, you may have.