What can stop investors getting so confused about sustainable investing?
One of the biggest issues for investors with sustainable investing lies with the lack of clear definition over what it actually means: sustainable investing can mean different things to different people.
Sustainable investing covers a broad range of different funds. The most well-known today is ESG – or investing in companies meeting specific environmental, social & governance criteria – and is often used synonymously with sustainable investing.
There are also ethical, impact and SRI (socially responsible investing) funds which fall into the sustainable category. Nevertheless, they all share the common thread of investing for better social and environmental outcomes.
Sustainable investing has moved a long way from being a niche area of the market to becoming a competitive strategy, coming through particularly strong in 2020 as companies falling under the ESG label have performed better than their peers.
Declan McAndrew, who is head of investment research at Foster Denovo, agreed that, in a person’s day-to-day life their engagement with sustainability is very personal and often ends up reflected in their investments. For some it might be a priority and for others it may not be important at all.
“To say ‘we don’t care about sustainability’ is actually a bit unsayable in 2020 particularly. Although those who go ‘this is our process we don’t adhere to that [ESG] at all’ that’s very clear. It’s where there’s more ambiguity going ‘we kind of do it’.”