In my work within the Financial Services sector I have found it refreshing to see that more and more of the conversations are now around Sustainable Investment and ensuring that as the world moves forward investors, both large and small are given a genuine option to put their money into funds that will support the development of the world as a whole.
In a recent article for MorningStar, Leslie Norton highlights this well, also mentioning the subject of greenwashing and giving some thought on how to avoid it.
Whilst my initial views are it is great to see so much media coverage on these issues and so many organisations talking about how they are changing their investment strategies, I think there are a number of issues that need to be clarified in more detail.
- ESG Funds, what are they? ESG is a business principal and as yet, there is no specific measurements to demonstrate that a fund or business meets any requirements. Until that happens, I think advisors should look at other measurements such as funds meeting the UN Social Development Goals or ensuring that funds have been accredited to show they meet specific criteria.
- Greenwashing, we must ensure that organisations or funds backing them are not just saying they plant trees to offset their carbon footprint and are genuinely taking steps to reduce their carbon footprint and protect the environment.
- Sustainability is not just about the environment. Although Leslie does mention this, it feels as though she has done so to tick a box and not because she genuinely believes it. Sustainability is about all environments, inside and outside of your organisation and the people in those environments. A genuinely sustainable organisation or fund will consider their impact on their staff, their local community and the global community as a whole, and yes, this does include being environmentally friendly.
Unless a fund or an organisation is considering these points, my view would be that they are not sustainable and should not be considered for investment. The challenge currently is that I suspect that almost all investments would fall into this category in some shape or form, so the biggest challenge is how to encourage them to evolve to become genuinely sustainable.