Socially Responsible Investing

Environmental, Social & Governance

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Over the past few decades, there has been a growing interest and awareness in investing in companies that take into account environmental, social and governance (ESG) factors.

This type of investing – also known as sustainable, responsible or impact investing – aims to generate both financial returns and positive social and environmental impacts.

Sustainable investment funds

The origins of ESG investing can be traced back to the 1960s, but it was in the 1970s that the environmental movement gained momentum, with investors increasingly calling on companies to address issues such as pollution and resource depletion. And in the 1990s, corporate governance came into the spotlight following a series of high-profile corporate scandals.

ESG investing has its roots in the field of responsible investing (RI), which emerged as a response to growing concerns about the negative social and environmental impacts of businesses. RI investing initially focused on screening out companies with poor ESG records from investment portfolios.

Corporate behaviour

Over time, RI evolved into a more proactive approach that seeks to engage with companies on issues related to their ESG performance and influence corporate behaviour for positive change. This is often referred to as ‘active ownership’ or ‘impact investing’.

Today, ESG investing is a mainstream investment strategy used by institutional investors and individual investors alike. In fact, one in six investor respondents to a global responsible investing survey are committed to aligning their portfolios to net zero, with a further 42% intending to align their investment portfolios to net zero before 2050[1].

Responsible investments

While debate continues about whether doing well (financially) and doing good (morally) need not be mutually exclusive, the survey finds that more than two-thirds (69%) of respondents with exposure to responsible investments are satisfied or very satisfied with their returns to date.

Increasingly, investors are also reflecting more on what it means to be ‘responsible’. Specifically, many are actively considering what impact their investment approach can have on society and the environment. The survey identified one of the main reasons for including responsible investments in portfolios is the perception that they will lead to better risk adjusted returns when compared to ‘traditional’ investments.

Personal values

Investors’ concerns around major ESG issues continue to rise, and many are in the process of addressing at least some of these in their investment strategies. For some, it’s simply a matter of aligning their investments with their personal values.

Others believe that companies that manage ESG risks well are likely to be more financially successful over the long term. And still others see ESG investing as a way to generate positive social and environmental impacts.

How can you mix in ESG into your portfolio?

Climate change, demographics, biodiversity and the need for social justice are at the top of the agenda for many investors. The world of investment is catching up. An increasing number of funds now boast of their ESG credentials. If you would like to discuss how this could form part of your portfolio, please contact one of our ESG investment advisors for more information.

Important information: The value of your investments can go down as well as up and you may get back less than you invested.

Source data: [1] Aon’s Global Perspectives on Responsible Investing Report January 2022.

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Adapting to climate change

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The impact of climate change has spurred many to take action and live more sustainably in the last 12 months.

Socially Responsible Investing (SRI) has always been at the heart of our investment philosophy and we spend time building our SRI portfolios, carefully considering various environmental and social elements of every fund before we invest.

To find out more about our sustainable investment funds and how you can do your part to help the planet, speak to one of our socially responsible investment advisors.

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SRI environmental impact

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Investment Analyst, Jenny Farrell, explains the environmental impact on SRI portfolios. This is concerned with the conservation of the natural world and environmental criteria may include a company’s energy use, waste, pollution, natural resource conservation, and treatment of animals.

Get in touch with one of our ESG investment advisors to discuss how our sustainable investment funds can help you do your part for the planet.

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Impact on climate change

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Climate Concerned? –  You can choose a Socially Responsible Sustainable ‘Green’ Pension Fund

Nearly two-thirds of people in the UK more concerned about climate change.

The impacts of climate change have been increasingly felt around the world in recent years. Governments, businesses and citizens alike are urged to take steps to reduce their environmental impact. The reality is that climate change is a threat to human wellbeing and the health of the planet.

Recent weather events, such as heatwaves, floods and fires this year, have made nearly two-thirds (60%) of people in the UK more concerned about climate change. A further 59% are also worried about weather reports from other countries, including in Australia and America, according to new research[1].

Wide choice of sustainable pension funds available

The good news is that there is now a wide choice of ‘green’ investment and pension funds available and these have grown in popularity over recent years as more people become aware of the climate crisis and its implications. These initiatives allow investors to allocate their capital into sustainable funds, which support businesses and projects that promote a cleaner environment and renewable energy for example.

UN climate summit

Two out of five (42%) people have said that the UN climate summits have made an impact on their climate change concerns – and 40% said that having children and grandchildren has made them worried about climate change.

This has spurred many to take action and live more sustainably in the last 12 months. Most popular planned changes include reducing plastic usage (71%), shopping locally (62%), driving less (53%) or buying an electric or hybrid vehicle (32%), and consuming less meat and dairy

(49%).

You can choose pensions and investment funds to play your part in helping our planet

By choosing a ‘green’ pension fund(s), you can not only do your part to help the planet.

Ellis Bates Financial Advisers offer a range of sustainable investment funds for you to consider, avoiding unethical companies, while supporting those making a positive contribution to the environment.

If you would like to discuss your options with one of our socially responsible investment advisors, please get in touch.

The value of your investments can go down as well as up and you may get back less than you invested.

Source data: [1] Royal London surveyed 2,000 nationally representative UK adults aged over 18. Research was carried out by Opinium between 14 October and 18 October 2022.

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Green pension funds

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Green pensions – does your employer offer pensions which are invested responsibly?

Research has found that 83% of the UK workforce view climate change as an important issue, with 72% saying that it was important their employer invests their savings sustainably.

Find out more about our sustainable investment funds and how we carefully consider various environmental and social elements of every fund before we invest.

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Green pensions

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Doing the right thing for the planet – Four in five looking to change jobs demand green pensions.

When you first start paying into your employer’s pension, your contributions, along with employer contributions and tax relief, will be invested through a default fund. You will usually have several fund options to choose from.

Increasingly, new research has identified that people are choosing to work for employers that provide ‘green pensions’[1]. Today’s workers expect employers to show true leadership and offer pensions which are invested responsibly.

Investments in high ESG-risk sectors

Demonstrating a genuine commitment to environmental, social, and governance (ESG) priorities is not only the right thing to do for the planet, it could also be a game changer for attracting and retaining the best talent. Business leaders have a real opportunity to show staff that
they are serious about doing the right thing.

Many companies remain unaware of how their current employee pension schemes can undermine the progress they are making to develop more sustainable operations, primarily due to sizeable investments in high ESG-risk sectors such as coal, oil sands and tobacco.

One of the top four benefits

The data reveals the views of employees and employers relating to sustainable workplace policies and individual practices. Across the UK workforce, eight out of ten employees (83%) view climate change as an important issue – expecting their employer to take an active stance on ESG issues and implement sustainable workplace practices.

One quarter (24%) of employees cited support for more sustainable personal finances – including green pensions – as one of the top four benefits that they expect from a new employer, alongside flexible working (48%), cost of living support (39%) and an attractive holiday package (34%).

More sustainable pensions

72% of workers said that it was important their employer invests their savings sustainably, as part of their organisation’s overall stance on critical environmental and social issues. With a third (32%) of workers currently seeking new employment – and a further quarter (24%) planning to apply for new jobs in the next year – the data suggests that the provision of more sustainable pensions may provide a new way for employers to attract and retain talent.

Despite this sizeable employee demand, only a quarter (25%) of employers claim to be knowledgeable about green pensions. More than a third (37%) of employers claim to not know anything about them or have never heard of them.

Social and governance outcomes

In fact, nearly half of employers (43%) identified a green pension as a fund that avoids investments in highly polluting industries, such as oil or thermal coal projects. But only a fifth of employers (22%) acknowledged the social and governance outcomes, such as the equitable treatment of workers or promotion of gender and racial diversity on corporate boards (17%).

With over a third (34%) of employers admitting they don’t currently offer a sustainable pension scheme to their employees, there is a significant commitment gap on implementing workplace policies that positively impact ESG issues.

Socially responsible investment advisors

At Ellis Bates we have socially responsible investment advisors who can provide insight and guidance on our sustainable investment funds. We screen and choose all our funds against a range of ESG factors so you can see the impact your investments are having.

Are you planning for the retirement you deserve?

When it comes to retirement, you deserve the chance to enjoy the freedom it brings without having to worry about money. To make sure your retirement plans are on track, or to discuss our retirement planning services, please get in touch.

Source data: [1] Make My Money Matter, FTSE100 Research, September 2022

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Asset Allocation

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What is asset allocation and diversification?

Asset allocation involves diversifying your investments among different assets, such as equities, bonds, property and cash. Asset allocation may change depending on what works for you based on your financial goals and your ability to tolerate risk.

  • Cash: Cash equivalents and other forms of money can be easily accessed at any time.
  • Equities: Purchasing shares on the stock market, typically traded on the Stock Exchange.
  • Bonds: A fixed-income product representing a loan made by an investor, typically corporate or governmental, for a fixed period.
  • Property: Buying properties intending to make money e.g. rental income or selling a property.

When building our portfolios, we consider all the economic and technical market conditions that influence our exposures to the main asset classes of Ellis equities, bonds, property and cash.

We screen and choose all our funds, not just our Socially Responsible Investment portfolios, against a range of Environmental, Social and Governance (ESG) factors so you can see the impact your investments are having.

Read more on our screening process for sustainable investment funds.

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What is a Green Pension?

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Choosing to go green on our pension investments could have a far greater impact on the environment than we may have thought.

The positive news is that almost three quarters (74%) of pension schemes already have net zero plans in place, or will do within the next two years and pension schemes are making progress towards net zero commitments.

With new Taskforce on Climate related Financial Disclosures (TCFD) requirements coming into force, the number of schemes making such commitments is expected to grow further still.

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Environmental Impact of SRI Portfolios

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This video looks at the Sustainable Development Goals that fall within the environmental category. This is concerned with the conservation of the natural world, as well as a companies energy usage, wastage levels and pollution.

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How Green is your Pension?

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Time to consider a healthier approach to retirement?

Pension schemes have a critical role to play in the transition to a net zero economy, with many schemes already assessing the impact of their investments in the context of the goals of the Paris Agreement.

Striving to improve investment practices, and robust transparency standards across the investment chain, are an essential part of ensuring schemes can act as responsible stewards on behalf of millions of UK pensions savers.

Net Zero Commitments

Choosing to go green on our pension investments could have a far greater impact on the environment than we may have thought. The positive news is that almost three quarters (74%) of pension schemes already have net zero plans in place, or will do within the next two years and pension schemes are making progress towards net zero commitments.

With new Taskforce on Climate related Financial Disclosures (TCFD) requirements coming into force, the number of schemes making such commitments is expected to grow further still.

Identifying suitable performance

The news comes as climate change and Environmental, Social and Governance (ESG) stewardship continue to rise in importance and have become a central part of pension schemes’ investment strategy, with identifying suitable performance measures and devising frameworks to report on them also rising in importance.

Two-thirds (63%) of pension schemes have started working on their TCFD report, with over half (55%) saying they are within the scope of the reporting deadline and so plan to publish one this year.

Climate transition plans

More than a quarter (28%) have gone a stage further and said that they have already published their TCFD report, despite it not being a mandatory requirement. In terms of stewardship, two-thirds (68%) see their key priority as investors as being climate transition plans. Over half (56%) see these being net zero targets, while around a third (37%) see board diversity and human rights (35%) as key priorities.

Major risk to portfolios

In terms of non-climate related ESG factors, diversity and inclusion (51%) and human rights (49%) are seen to be the most important. There are a number of reasons for this increase, including regulatory pressure and public concern about climate change. However, the most important factor is likely to be financial: more and more investors are recognising that climate change presents a major risk to their portfolios.

Reviewing investment strategies

As a result of this increase in awareness, many pension schemes are now reviewing their investment strategies. Some are divesting from fossil fuel companies, while others are investing in green infrastructure and renewable energy. The survey shows that pension schemes are taking climate change seriously. This is a positive development, as it means that more and more people will have a retirement income that is not put at risk by the threat of climate change.

 So how Green is your pension?

Although we might like to think that our pension contributions are simply locked away for us to use once we retire, the reality is that this money is being invested. Greening your pension might be the single most effective action you can take to reduce your carbon footprint.

For more information or to discuss your retirement plans, please do contact us.

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