Stephen Bird, CEO, abrdn.
Investing your savings is one of the most important financial decisions you’ll make. It can also be one of the most confusing. After all, there are lots of different types of investment opportunities out there, and it can be difficult to know which ones are best for you. In this article, you'll learn what sustainable investing is and how you can build a healthy portfolio that supports your local community while protecting the environment and society as a whole.
You’ve probably done your part as a citizen: chose local and bio products, sort your waste, reduce plastic and energy consumption, travel by train or bike... you name it. But now you’d like to see a bigger impact at society level and have your money work for a positive change.
You are not alone in this quest. Actually more and more citizens are looking for investment opportunities that correspond to their values. Just as we have learned to become more responsible consumers, we must now learn to become responsible savers and investors.
Our planet is increasingly exposed to the unpredictable consequences of climate change and resource depletion. Action is therefore urgently needed to adapt to a more sustainable model. 350 billion euro of additional investments per year will be needed for the EU to meet the targets set in 2020 in the 2030 climate target plan.
By placing your savings in companies or financial products that meet environmental, social, and good governance criteria, you make sure you finance sustainable activities with an impact for the long term.
Environment: refers to criteria that measure a company's impact on the environment: carbon emissions, electricity consumption, waste recycling, impact on biodiversity;
Social: refers to criteria which measure the impact of the company on its stakeholders: employees, customers, suppliers and local communities by reference to universal values such as human rights, international labour standards, safety, security, representation;
Governance: refers to criteria that relates to how a company is managed, administered and controlled: relations with shareholders, its board of directors and management, the transparency of executive remuneration, the fight against corruption and bribery.
All of these criteria make it possible for you to assess the ability of companies to act responsibly towards their environment and their stakeholders, whether employees, partners, subcontractors or customers, and society.
Actually a lot of listed companies must publish a non-financial statement. In any case, your financial advisor must provide you with the documentation of each investment product before any subscription and, since August 2022, collect your ESG preferences.
Exclusionary strategies: when you start investing you may wish to exclude certain companies from your portfolio due to the nature of their activity, for instance fossil fuels, controversial weapons, or tobacco companies.
Thematic strategies: in this case you may wish to choose to invest in specific sectors that are aligned with your vision and values such as renewable energy, carbon capture, water treatment etc.
You can chose to buy the bonds of two companies: Vertéus installs solar panels but its profitability is average, while Polus, which operates coal-fired power plants, has a double-digit growth rate. If you want to do sustainable finance, then you would choose Vertéus based on the criteria of sustainability, positive environmental impact, and this despite a lower short-term profitability. Your sustainable investment may turn out more profitable in the long term and it fulfils your desire to contribute to a positive change for the planet.
In the case of Polus, the cost of laissez-faire is higher than the cost of preventive measures to reduce the impact of carbon emissions.
So, if you want to get involved and build the world of tomorrow new world, stand out and give meaning to your savings!