Going green with your pension

Make My Money Matter

At the beginning of July, the film director & campaigner Richard Curtis joined Mark Carney, the former Governor of the Bank of England to launch the ‘Make My Money Matter’ campaign. The idea behind the campaign is simple – we can use the £3 trillion invested in UK pensions to create a better environment and society.

Most of the money we pay into our pensions is used to buy shares in UK and international companies. Unless you take a keen interest in these matters, someone else will be making the decisions about what investments to make on your behalf. Their mandate, like most investment managers, will be to make a profit regardless of the harm done along the way. More and more people are finding it difficult to reconcile this approach with their personal values and ethics.

Impact Investing

Dating back to the eighteenth century, the roots of ethical investment can be found among the Quakers, who restricted members from spending their time or money in the slave trade. In the 20th century, ethical investing gained traction based on people's social views more than their religious ones

Historically, ethical investing focused on excluding specific companies or sectors – like tobacco or arms. Today though, most strategies have evolved to include companies that have best in class Environmental, Social & Governance (ESG) scores in a particular sector. Impact investing goes a step further by investing in companies whose products and services help create a better world as well as delivering returns for shareholders.

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 that 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. Mark Carney, now a UN special envoy for climate change & finance said supporting an economic transition could be 'the greatest commercial opportunity of our time'.

What does an impact portfolio look like?

At EQ we use the UN Sustainable Development Goals as a framework for our Positive Impact Portfolios. It’s estimated that investment of between $5 and $7trillion is needed to meet the goals by 2030. There are many businesses who are already contributing towards meeting these goals.

Some examples include:

Goal 7 – Affordable & Clean Energy

The Danish energy company Ȯrsted has radically changed its busines model to align with climate change mitigation efforts. They run the largest offshore wind farm in the world. By 2025, they will have added 15GW of renewable energy capacity.

Goal 12 – Responsible Consumption & production

Umicore is helping to enable the electric mobility revolution by recycling batteries (7,000 tonnes a year) and producing green products from the waste stream. This helps reduce the need for new metal mining.

Goal 11 – Sustainable Cities & Communities

The Hightown Housing Association is helping to solve the social housing crisis by helping build or improve housing stock. Specialising in care & supported housing, it helps the most vulnerable in society find long-term affordable housing.

Making a positive impact

You might be thinking that your pension fund won’t make a difference. The average UK pension fund is a little over £20,000. Switching £20,000 to an impact portfolio reduces your carbon footprint by over 4 tonnes each year. That’s the equivalent to taking a car off the road for a year. In fact, changing your investments could be more effective than adopting a vegan diet or giving up flying.

Increasing availability

Of course, identifying these companies is time consuming and that’s where EQ can help. We provide ‘positive impact’ portfolios on a discretionary basis. This means our expert team does all the research and monitors the investments, so you don’t have to. We want to make sure impact investing is available to everyone, so we have services to suit a range of different people.

If you want to find out more about impact investing, do let me know. I’m always keen to meet individuals who share our values and might find our services useful. So, if you would appreciate a chat or meeting, please get in touch – jeannie.boyle@eqinvestors.co.uk

Jeannie Boyle, Director & Chartered Financial Planner EQ Investors

If you want to contribute to the Chamber blog, contact us on hannah@brightonchamber.co.uk