How Green is my Investment?

 

Ethical Investing is gaining popularity however industry jargon can leave investors confused. We have highlighted some of the common terms you need to be aware of:

Negative screening – is the decision not to invest in funds that are inconsistent with the values of the investor/fund manager. A common negative screen applied is screening out investments in industries which have a negative impact on society and/or the environment.

Positive screening – is the decision to actively seek out investments that contribute positively to society and/or the environment. Some examples include assessing a company’s activities against its peers or seeking sectors that will have a positive impact on the environment.

Corporate engagement – this involves the fund managers holding dialogue with companies raising issues of concern and advocating positive change to company practices.

Socially Responsible Investing (SRI) – this is where companies and sectors are negatively screened out and not included in portfolios if they make or sell certain products or engage in certain activities.

ESG investing – ESG stands for Environmental, Social and Governance and these three factors are measuring the sustainability and ethical impact of a business. From an environmental angle these could include greenhouse gas emissions, waste and pollution, deforestation. Social factors could include working conditions, child labour, health and safety, employee relations and diversity. Governance factors may consider executive pay levels, bribery and corruption, political lobbying and donations.

The ethical colour palette can vary in shades of green where dark green investments may include negative screening along with corporate engagement.

As always please remember that all investments require extensive research to ensure they align with your goals, time horizon and values.

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This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs.