Our responsible investment approaches

This week’s London Climate Action Week Digital (1-3 July), is another example of the increasing focus on green finance and investment.

FacebooktwitterlinkedinmailFacebooktwitterlinkedinmail   by Damien Lardoux, 3rd July 2020

Financial jargon can be hard to keep track of at the best of times – and just when you think you’ve gotten a handle on the latest money mutterings; they change all over again.

But whether it’s termed green, ethical, ESG (environmental, social & governance) or sustainable investing, the aim is generally the same: it’s making money while making the world a better place, and it’s clear this is a fast-growing market.

This week’s London Climate Action Week Digital (1-3 July), is another example of the increasing focus on green finance and investment.

UK investors ploughed more than £2.7 billion into what the Investment Association terms ‘responsible investment’ funds between January and November 2019, the highest annual inflow ever recorded. Close to £26 billion is now invested in these funds, up from £12 billion just three years ago in November 2016.

Historically, ethical investing focused on excluding specific companies and sectors – like tobacco or arms. Today though, most strategies have evolved to include companies that have best in class ESG scores in a particular sector. Whilst impact investing goes a step further by investing in companies whose products and services generate social and environmental impact as well as financial returns.

Responsible approaches

At EQ, we combine a number of these different approaches in our Positive Impact and Future Leaders portfolio ranges, through which we invest in a range of different funds from all over the green investment universe.

With an eight-year track record, the Positive Impact Portfolios are for investors who want to maximise their impact and returns. Recently launched, the Future Leaders Portfolios are for investors who want to invest sustainably through low-cost passive funds.

Suitable for ISAs and personal pensions, the underlying investments in each range are mapped against the UN Sustainable Development Goals and the carbon footprint is also measured (as shown in the chart). Going forward investment portfolios will need to continuously decarbonise to tackle global climate change and low emissions portfolios are better prepared for climate change transition risk.

But no investment is included based on its environmental or social credentials alone – it must also aim to deliver an attractive return for investors. Demand is being driven by this combination and an increasing number of us who prefer to invest in alignment with personal values.

Strong returns

Many studies from heavy-hitting financial institutions including Morgan Stanley have shown that green investment can boost returns while reducing risk. This makes sense when you consider this approach favours companies that are actively trying to do good and run their businesses in a sustainable way.

Such companies avoid fines and other penalties and have stronger relationships with their customers, suppliers and employees. Moreover, they tend to operate in new sectors with high-growth potential. In short, these are the green companies of the future, and those we want to be invested in.

Find out more

Have a question about investing responsibly? Please email enquiries@eqinvestors.co.uk, we’re always happy to hear from you. Alternatively, you can find out more about our online and telephone investment service here.

About the author: Damien Lardoux

Damien has an MSc in Management from Reims Management School and an MSc in Wealth and Asset Management from ESCP-EAP Paris Business School. He is also a CFA charter holder, being a regular member of the CFA Institute and CFA UK society.

Before joining EQ Investors, Damien worked for Bank of America Merrill Lynch being responsible for asset allocation, security selection and portfolio construction. Damien now acts as the portfolio manager for the EQ Investors Balanced, Positive Impact and Multi Index portfolios. He also co-chairs our Fund Selection Committee.

Damien is a devoted sportsman, playing judo and squash on a regular basis. He also enjoys hiking, to very far places such as the Himalayas and Kilimanjaro.

Search the EQ Library

View articles by topic: