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Foster Denovo|News & blogs|Opinion|Why ESG investing can help to fight climate “doomism”

Why ESG investing can help to fight climate “doomism”

With so many negative headlines about climate change, it can be easy to worry about what the future holds. We have seen the highest temperature in the UK since records began.

On 19th July 2022 the temperature passed 40 degrees for the first time as a direct result from climate change.

This has highlighted that we are all experiencing the very real consequences now.   In addition, we also have plastic pollution in the oceans, rising sea levels, and deforestation. It’s no surprise it can feel like time is running out to reverse the damage that we are inflicting on the planet.

For example, you may have seen the recent Guardian report that stated that greenhouse gas emissions must peak by 2025 if we are to turn the tide on the climate crisis.

While you probably already do your bit to help the planet – such as diligently recycling your waste, cycling to work instead of taking the car, or eating a plant-based diet – there are ways you can use your money to help fight climate change, too.

Environmental, Social, and Governance (ESG) investing has become a popular avenue for investors to help fight climate change using their wealth in recent years. Read on to find out how ESG investing works, and how you could use your savings to effect positive change for our planet.

ESG investing aims to make a positive impact on the world

To put it simply, ESG investing seeks to align your investments with the moral beliefs you hold. It stands for:

  • Environmental – This criterion looks at how a business’s practices affect the environment. For example, it may consider their carbon emissions or energy efficiency rating.
  • Social – This criterion considers the business’s relationship with the communities it operates in. This can cover issues such as worker’s rights and customer satisfaction.
  • Governance – This criterion looks at how the business is managed and the standards to which it is run. It may focus on issues such as pay of CEOs or fair election of board members.

Abiding by ESG principles can help you to align your money with your morals and personal beliefs and as a result make a positive change in the world. For example, you could avoid investing in funds that go against your core values – or you could actively contribute to funds taking positive action.

At a time when many people are concerned about the environment, sustainable investments can help to give you greater peace of mind to know that you’re doing your part to change things for the better.

Research shows ESG and sustainable investing can prove even more effective than making lifestyle changes

With so many negative headlines about humanity’s impact on the natural world, it can be easy to feel overwhelmed by climate “doomism”. When you think about the scale of the problem, it’s understandable if you feel like your efforts are only a metaphorical drop in the ocean.

That’s why, if you want to do your part, changing your investment strategy can be a great way to help save the planet.

A 2020 study by Make My Money Matter, published by PensionsAge, claimed that moving your pension into a sustainable fund can be up to 27 times more effective at cutting carbon than giving up flying or becoming vegan.

For many, ESG and sustainable investing is the very definition of “putting your money where your mouth is” when it comes to living a more sustainable life. So, if you are searching for ways to make your mark on the environment in a positive way, exploring this option when it comes to your pension and investments could be very beneficial.

The outbreak of war in Ukraine has highlighted the need for energy security

In the past few months, the arguments for investing according to ESG principles have been greatly strengthened. For a start, the Russian invasion of Ukraine has highlighted the risk of being overly reliant on non-domestic supply chains.

As you may have seen, countries such as Germany and Italy have struggled due to a heavy reliance on Russia for their energy needs. According to the Guardian, Germany may even be forced to introduce gas rationing this winter if they aren’t able to build up their reserves in time.

Due to the sanctions on Russian oil and gas, the cost of energy in many countries has spiked. This has prompted many governments to invest more money in renewable energy sources, such as wind and tidal power, which won’t be reliant on global markets.

Not only will this move strengthen the UK’s energy security, but it will also help to reduce the nation’s carbon emissions, slowing down climate change.

With the effects of global warming become more and more apparent, it’s likely that there will be a greater focus on renewable energy in the future. Due to this, companies in this area may see long-term growth regardless of the current market volatility.

At the end of the day, not only can investing according to ESG principles help you to make a positive change in the world, but it can also help you to grow your wealth effectively. Get in touch

For guidance on ESG and sustainable investing, or any other financial matters, please email us at advise-me@fosterdenovo.com or call us on 0330 332 7866 to speak to one of our team.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

The FD Sustainable Dynamic Portfolios are investment portfolios provided by FD Dynamic Portfolios Limited (FDDPL) which is an appointed representative of Foster Denovo Limited (FRN 462728), and is authorised and regulated by the Financial Conduct Authority (FCA). FDDPL has issued this document in its capacity as investment adviser to the investment manager, AB Investment Solutions Limited (FRN 705062), which is authorised and regulated by the Financial Conduct Authority (FCA).

 

Sources:

https://www.theguardian.com/environment/2022/apr/04/ipcc-report-now-or-never-if-world-stave-off-climate-disaster

https://www.pensionsage.com/pa/Make-my-money-campaign-launches-highlighting-power-of-sustainable-pensions.php

https://www.theguardian.com/world/2022/jun/23/german-announces-emergency-plan-as-russia-chokes-gas-supplies

 

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