Sustainable Investing — You can do it!
Sticky topics
While this entry was supposed to be about the global water crisis, recycling, fast fashion or the actual environmental benefits of electric cars, I have been pulled back into my line of work (banking) and the topic of Sustainable Investments. As we all know, big bad banks invest in big bad companies that are horribly unsustainable. Then one or two of the thousands of issues come to the attention of the press and Roger Federer gets attacked by Greta for being sponsored by Credit Suisse. Justified, unjustified — I will let you decide.
You have the power
Banks are however not the only ones that can invest sustainably or unsustainably — private investors can too. So, do YOU think about sustainability when you look at your portfolio? Do you research the underlying companies of the investment products in your portfolio to figure out how sustainable they are? Do you ask your bank for information? While we are still living in a world of supply and demand (I know, I know, we should step away from those economic theories), one could argue that the client creates the demand for a sustainable investment offering.
Do as I say, not as I do
According to various surveys conducted by banks such as UBS and institutes such as the Cambridge Institute for Sustainability Leadership, the majority of clients (65% according to UBS) definitely want a sustainable offering of financial products but only 39% (according to UBS) have any type of SI in their portfolios. When talking to front staff directly, the picture of what the client wants appears even more bleak: most of us seem to only care about return, mostly….
Black or white?
Now let’s say you are different and you actually care about your money not just working for you, but also for the planet, WHAT DO YOU DO? You could discuss for days around VW being on the “sell” list due to poor corporate governance and on the “buy” list due to advancement in the field of electric cars. You could have sleepless nights because you invested in Nike believing in their “sustainability strategy” and are confronted with a newspaper article about a recent scandal in one of the factories associated with them. Fact is, it will be hard to find a black or white investment unless you go for a philanthropy approach (doing good without return).
Navigating the jungle
In the end Sustainability is like eating healthy. There are many ways to eat healthy and it depends on your preference which one you go for. So, for a start, rate the SDGs according to your personal order of importance. That’s your starting point — then find investment products that work towards those goals, or better yet, make your client advisor look for them for you. The more specific you can be, the easier it will be to build your portfolio. Many large banks have the data available and they will dig it out if you are specific enough.
You’ve got options
After a lot of blah blah, here are some concrete vehicle types for you to consider (if you buy regular equities, you can of course look into each and every one of the directly, but there are products that are “made to be sustainable”):
Green Bonds: Just like regular bonds, but the funds are reserved to specifically finance environmental projects. They can be issued by any regular issuer.
Development Bonds: Bonds issued by multilateral development banks (MDBs) and are to play a critical role in improving social conditions in areas where capital investments are otherwise not available
ESG Leaders Bonds: ESG Leaders bonds/equities are issued by companies that are leaders in managing a range of sustainability issues better than their competitors.
ESG Thematic Equities: Equities of companies that develop products that directly tackle sustainability challenges (e.g. water treatment solutions).
Discretionary Mandates or Funds solutions: Some bank offer SI mandates or funds that they manage themselves with the promise of 100% sustainability focus. They generally apply their own investment research approach that they will be happy to share with you.
These are just a few that could give your financial portfolio a bit of a green tinge….
Oh, and yes, there is a picture of the High-Level Conference of Sustainable Finance… I will talk about a simplified way to look at what they came up with next time. Until then, happy #Sustainableinvesting :-)
