Have you ever looked under the bonnet of your personal or company pension or stocks and shares ISA to see how your money is invested? I’m not talking about how much you have in the UK, Europe, Asia or Emerging Markets. I am talking about delving deeper and getting an understanding of the individual companies you are perhaps unwittingly investing in. Do they match or clash with your ethics, ideas and principles?
Would you, for example, be happy investing in a company that refuses to recognise climate change and continues to pollute the world with an ever-increasing carbon footprint? How do you feel about tobacco companies, or companies that engage in animal testing? Would you know whether you were investing in companies that destroyed rain-forests across the world? Or manufactured plastics that ended up in our oceans?
Putting ethics and good principles aside, do these companies actually have a future or are they dinosaurs, destined to be dead and buried in a few years’ time? And if they are indeed dinosaurs, should we be investing in them?
The tide is changing
This week, the world’s largest asset manager, BlackRock, announced that it is to make climate change a pillar of its corporate strategy and mission. With 7 trillion dollars in assets under management, this is likely to have a huge impact and could reshape the investment and fund manager landscape. With a new set of steps, they intend to weave sustainability into their investment products including:
• Offering sustainable versions of their portfolios
• Dropping companies that produce coal
• A tougher stance on companies that lag behind in matters of climate change
Why this is important
When a company of BlackRock’s size and influence makes a bold decision such as this, other investment houses tend to sit up and take notice. And follow suit. This excellent start will instantly raise the bar for competitors. Although I believe they could do a lot more, eventually, this stance could spread to other areas that are viewed as unethical, socially unacceptable and irresponsible.
Currently, individual investors need to make a conscious decision to invest in companies that are environmentally and socially responsible via their pensions or stocks and shares portfolios. With the turning tide and momentum, environmental and socially responsible investing could soon become the norm.
Dare to dream
Could there be a time in the future when all fund managers automatically invest in funds that are ethical and sustainable and take matters such as climate change into consideration? That would be great for advisers and investors.
Until that happens, you and your financial adviser will have to do the screening to ensure that your investments match your principles. This is not always an easy task and could involve quite a lot of digging. Just make sure your financial adviser is up to the task.