Net flows into sustainable/responsible funds in the US reached $20.6 billion in 2019, more than four times the previous annual record set in 2018, proving that this type of investing is soaring in popularity and strengthening its presence in mainstream investing.
As an Appointed Representative of Evolution Wealth Network Limited, which is part of Benchmark Capital Limited, Finura and their Clients have access to a comprehensive range of Funds and Model Portfolio solutions run exclusively on the Fusion Wealth Platform. One of the ranges is FW Ethical Portfolios, which have been available since 2008 and have been widely used for Clients with ESG (“Ethical, Social, Governance”) investment requirements. Over the last 10 years, ESG adoption has developed significantly and there are now many more investment options available than before.
Due to the growing list of interpretations and definitions being used in the market, and the fact that there is so much more to responsible investing than just ethical considerations, Fusion Wealth have renamed their FW Ethical Portfolios as FW Responsible Portfolios.
In view of the name change, our commitment to providing our Clients with responsible investment choices and the launch of three new Fusion Wealth responsible portfolios, we thought it would be useful to highlight the key elements of responsible investing below.
ESG is the overarching term for investments that incorporate Environmental, Social & Governance considerations into the investment decision alongside traditional financial analysis.
Environmental factors include deforestation, waste management, climate change and biodiversity; social factors include labour standards, health & safety and nutrition, whilst governance relates to topics such remuneration policies and diversity.
Whilst sustainable investing involves ESG integration, it focuses more specifically on companies that lead their sector in ESG practices. This approach may involve engaging with the business’ management team to ensure the firm is being run in the best possible way and/or challenging them on their sustainability practices to encourage improvements where necessary.
As the name suggests, investments under this category are screened based on certain criteria. E.g. if an investor is keen on companies that promote workplace diversity, investment opportunities may be screened on criteria such as those that promote women and/or minorities at management level positions. Investments can be screen negatively (those that do not meet the criteria) or positively (those that do).
Screening is commonly used in ethical investing to rule out investments that do not meet the investor’s ethics or values. It is also referred to as values-based investing.
Screening criteria here could include alcohol, tobacco, adult entertainment, gambling companies or any other similar industries that investors deem unethical.
This involves investing money into portfolios that have a specific, measurable and positive benefit to society or the environment. They are different to charitable donations in the sense that they can deliver a return on investment at the same time as promoting social good.
Here an investor will choose their investments according to a particular theme. For example, if they are interested in health and wellbeing, then they may only consider funds that invest in businesses linked to fitness products, health food supplements or vaccines.
If you would like to discuss diversifying your portfolio to include responsible investments, please contact your Finura adviser.
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