Many of us have money in investment funds, either directly invested or through a pension plan. How confident are we that those funds line up with our ethical standards, in particular our concerns for the environment? Here are some thoughts:
Easy signs to spot
- ESG (Environmental, Social, Governance) is now the most used term in the industry for environmental / sustainable investing.
- Any fund invested with environmental concerns high on the agenda will probably have ESG, SRI (Socially Responsible Investing), Ethical or something equivalent in its name.
Note: Even named ESG funds will almost certainly have investment growth as a leading objective
Going into more detail
- Go to the website of your fund provider, find their fund list, and download the Factsheet and/or the KIID (Key Investor Information Document) for your fund.
- Near the top of at least one of these documents, the high-level investment objective and policy of the fund should be clearly laid out. If sustainable or environmental concerns are a high priority, it will say so.
- If you want the most detail publicly available, you can search for the fund prospectus, which should also be available to download in the fund list. There you can find your fund’s full investment objective and policies.
- For a more independent ESG fund assessment, you can search for ESG ratings and analysis for most funds on both the MSCI and Morningstar websites
Searching for greener options
- If you’re not happy with any of your current funds, you can log in to your account on your provider’s website, look for a tab along the lines of ‘available funds’, and see if they offer a fund that better meets your environmental requirements.
- If there isn’t a suitable option, maybe you need a provider with a better range of ESG-conscious funds.
- Index providers have now started providing index benchmarks which already exclude certain companies (eg weapons manufacturers, tobacco, non-renewable energy companies). This is helping to accelerate positive change in the industry as it makes it far easier for investment companies to invest ethically.
- There is also a small but increasing number of ethical providers and funds for active stock picking funds that invest on a company-by-company basis with little or no reference to any market index. These tend to be riskier than index funds, and carry higher fees, but may be the only way to access more niche investment markets in an ESG-conscious way.