Were you aware that investors can help make a positive contribution to society and the environment? ­For example, by working with your financial adviser to include responsible and sustainable assets in your fully diversified portfolio (according to your own appetite for risk), you could contribute in the fight against global warming.

AdviceFirst Adviser and Regional Manager Mark Holtom says that in the past, fund managers could exclude assets that disagreed with their personal values – such as weapons manufacturing – but that was a reactive rather than proactive strategy.

In today’s environment, any investor can potentially help the planet or influence social change by investing in specific funds. For example, AMP has a Responsible Investment Leaders fund, and is trying to lead from the front in this area.  There are also other large funds that specialise in Sociable Responsible and Environmental, Social and Governance (ESG) funds.

“There are options where you can proactively invest in renewable energy projects all over the world, including wind and solar farms, sustainable forestry options and low carbon public transport.”

Mr. Holtom believes investors could have the ability to accomplish two feel-good objectives when they invest in responsible funds:

  1. The potential to maintain a fully diversified portfolio in-line with an investors risk appetite (to help meet future goals and objectives); and
  2. Investors can feel good about the potential to influence positive change in society and the environment.

Influencing change

“Investment managers can engage with companies to find how they are managing their company strategy and mitigating risk.  For example, the investment manager can ask the potential recipient of a client’s investment, if they are working as a company to reduce their carbon footprint.  This responsible approach to investing can encourage companies to be transparent about their impact on the environment, and their commitment to changing their behaviour to keep up with social expectations.”

Mr. Holtom says investors can also help tackle gambling, alcohol abuse, tobacco, and obesity because their decision to invest in responsible and sustainable assets may impact the share price of a company.

Reduce future risk

Companies that don’t adapt or change in response to social change or environmental issues could go the way of organisations like Kodak, who notoriously failed to adapt their film-based business model to incorporate the digital camera movement, until it was too late.

“It’s not inconceivable to measure the risk of an investment by the company’s ability to adapt. Those that won’t change or are slow to evolve – for example demonstrating a reluctance to reduce emissions – might be considered a riskier investment.

“Simply by being conscious of how their money is used, investors can choose to help make a difference. Have a conversation with your adviser about how you can make your money count for the environment,” Mr. Holtom said.

AdviceFirst is a Financial Advice Provider (FSP23242).