Traditionally, investment decisions have been made using standard methodology. A balanced portfolio should have a diversified asset allocation with elements of equity, fixed interest, and cash. But, until recently, there has been little thought as to the underlying companies and, more importantly, how companies use the invested money.
But there is now an ever-increasing movement to invest where the goal is to make a difference – for the environment, society, and the wider world. Socially Responsible Investments (SRI) are about doing the right thing, whilst aiming to achieve your long-term financial goals.
The shift in sentiment is characterised by annual holidays such as Earth Day, which saw its 50th Anniversary this year and poses the question; is it possible to do well by doing good?
At Foresight, we believe that sustainability-related issues, ranging from the sustainable use of resources to climate change can have real financial impacts. A company’s ability to manage environmental, social, and governance (ESG) matters demonstrate the leadership and good governance that is so essential to sustainable growth.
Through the Foresight LGT Sustainable Portfolios funds invested in companies whose activities may be deemed as controversial are excluded. The portfolios invest in funds that mitigate their risk by having a strong focus on the environment, society, and good governance. This means looking for fund managers who identify companies that align themselves with the UN Sustainable Development Goals.
Selecting companies with a sustainable ethos can also translate to healthier growth forecasts. Companies with established ethical practices tend to quickly adapt to changing environmental and social trends, use resources efficiently, have engaged and more productive employees, and face lower risks of regulatory fines or reputational damage.
In the past, the main objection to investing ethically has been that, although clients would have preferred to have been ethical, they were more interested in the underlying returns on their investments than the social impact. However, we are now finding that companies that effectively manage ESG factors are more likely to create long-term value than those that do not.
So, it is no longer a question of why investors should look to sustainability issues; it is quickly becoming a question of why not.
If you would like to know more about our sustainable portfolios or would like to discuss Socially Responsible Investments then please get in touch and one of our Wealth Strategists will be pleased to explain how they work and how they could form an integral part of your portfolios.