I think we have all seen the photos circulating the internet about how the forced shut down of transport systems due to COVID 19 restrictions has improved the air quality of those major global cities.
Has this got you wondering can I still invest and benefit to the environment even if the global economy has been almost shut down.
All around the world, influential people, including our own Shane Warne raised over $1 million by selling his ‘baggy green’ have been increasingly active in supporting or promoting causes for an ecologically, economically and socially sustainable planet.
How can ordinary people lend their support to such worthy causes?
Ways to reduce your carbon footprint include:
shortening your showers by two minutes
taking one less international flight per year (not such a challenge in the current pandemic!)
taking the train instead of driving a car or where I live riding a bike isn’t too bad although thermals are recommended.
eating no more than one piece of meat a week
Whilst these are all admirable and proven ways to reduce CO2 emissions, switching your investment portfolio to sustainable funds is one of the more effective ways individuals can help to promote a more sustainable planet.
In fact, according to research conducted by Nordea Bank Abp in Sweden, sustainable, or environmental, social and governance (ESG) investing could have over 27 times the impact of all the aforementioned methods combined (1).
Investing in a fund that holds ethical companies – companies that are selected for the ESG benefits provided by their products and services, as well as the responsible management of their social and environmental impacts – promotes their growth by reducing their cost of capital. In layman’s terms, you increase a company’s access to funding so that it can embark on important projects and ventures to grow the company.
In addition to enjoying cheaper capital, companies that reduce emissions and pollution mitigate risk of litigation and reduce the potential for expensive environmental claims, settlements and compliance.
We have access to funds that are certified by the Responsible Investment Association Australasia (RIAA) as ‘Certified Ethical Investments’ according to the strict operational and disclosure practices required under the Responsible Investment Certification Program (2).
Many of these funds receive ratings of 4.5 out of 5 in 2019 from the Ethical Advisers Co-operative, which is the highest rating of any fund:
These funds employ both positive and negative screens over the global and Australian sharemarket, respectively. This means they don’t simply avoid companies with a negative impact, but proactively seek out companies that do good from an environmental perspective, offering a ‘true to label’ investment exposure.
We have access to funds that have no exposure to companies with direct or significant involvement in fossil fuels or coal.
1. Vigeo Eiris rating report, July 2018. Portfolio analysis for BetaShares Global Sustainability Leaders ETF. Based on the illustrative analysis conducted by Nordea Bank Abp (2018) in Sweden, based on certain assumptions regarding time period, sustainable vs. traditional investments, emission levels, amount invested and average annual return.
2. Lower Your Firms Cost of Capital by Managing Environmental Risks, Tirath Sandhu, 2011