I work with around 230 family groups, in some cases helping 4 generations of the same family. You would be amazed how much we all have in common, sharing very similar values, ethics and lifestyle goals. Money is the great enabler, allowing us the freedom to live our lives in comfortable independence and occasionally creating incredible memories for ourselves and our families. It is a great privilege to be part of your lives, I take my responsibility for your wellbeing incredibly seriously.

Financial planning isn’t about money, it’s about people. We all want security, certainty and a bit of fun! I see my role as an enabler, giving clients the opportunity to make great life decisions without the fear of ever running out of money

It is important to balance our own needs with the needs of others. Arranging our financial affairs for our own benefit can also directly benefit the environment, securing not only our own future but that of our children and future generations, Ethical, sustainable investing combined with the realisation of life goals has to be the way forward.

That is why I am now actively researching and promoting solutions that maintain our environmental integrity, giving us traditional security but with an added social conscience. I hope this will be a winning combination, Momentum Amet!

In recent years, ESG and ethical investing have moved from niche strategies to a mainstream part of investing.

But what’s the difference between ESG and ethical investing? Is it all the same thing called by different names or is each one a different thing? Let’s find out.

What’s ESG all about?

ESG describes three key factors used by fund managers to assess corporate behaviour:

Environmental
This concerns interaction with the physical environment, such as climate change, biodiversity, natural resources, carbon emissions, air and water pollution and so on.

Social
This looks at the impact on society and communities, including human rights, health and safety issues, labour standards, product liability, privacy and data security and so on.

Governance
This focuses on how companies are governed, including diversity, transparency, ownership, board independence, ethics, executive compensation and so on.

Fund managers use information on these issues to get a picture of the likely future financial performance of companies. The ESG framework is based on the belief that these factors are critical to a company’s future financial performance. The theory is that companies that don’t impact the environment, have a social conscience and are well governed will out-perform other companies.

ESG
That’s a significant difference between ESG investment and ethical investment, which focuses more on moral and ethical judgements than investment considerations.

That’s not to say that ESG investing doesn’t result in wider societal benefits. Fund managers looking to improve returns will assess a company’s responses to ESG issues and decide whether to invest. Where they invest, they’ll engage with the company to improve their ESG credentials and potentially their future financial performance. They may do this by:

The fund managers aim to encourage good practices at a company, paying attention to things like:

• it’s environmental impact
• its energy efficiency
• its transparency on tax and business practices
• how it treats its workers
• the proportion of women and minorities it employs
• whether it pays a living wage
• its relationship with stakeholders and shareholders
• the independence of the board in representing shareholder interests
• CEO pay
• the company’s contribution to climate change or air pollution.

These are only a few examples of the kind of things ESG investing looks at. Fund managers will scrutinise every company they consider before deciding whether to invest. So, what’s ethical investing?

As the name implies, ethical investing is about investing using ethical principles as a guideline. Often, it means filtering out certain types of companies and sectors – usually ‘sin stocks’ like weapons manufacturers, tobacco producers, companies involved in animal testing and so on.

This type of investing depends on the investor’s views. It gives investors the opportunity to channel their money into companies whose practices and values match their personal beliefs, whether these are environmental, political or religious.

Another aspect of ethical investment to be aware of is that investors may not necessarily be choosing a company based on its investment performance. For example, a nuclear company may be a sound financial investment, but is ruled out because of the investor’s stance on nuclear power. That’s not to say ethical investors will put money in a poorly performing investment. Of course, they will look to make money, but they may rule out certain strong financial performers because they don’t fit their ethical preferences.

Are ESG and ethical funds higher risk?

In the early days of ESG and ethical investing, fund managers and investors may have considered it risky to invest in these types of funds or investments. That’s no longer the case. With a wider range of stocks available to ESG and ethical investors, they can now easily spread the risk to their money, just as with traditional investing.

ESG investing means investing money as sustainably as possible in every sense of the word. It looks at environmental and social sustainability and makes sure companies have governance in place to improve that sustainability year on year.

By you choosing a Portfolio that has a strong ESG investment strategy as a default, you can help put pressure on companies to continually improve their position. And taking steps to make the world a better place to live is good for all of us and future generations.

Every £1 of your portfolio invested in sustainable investments will help save the planet for our children and our children’s children. What’s not to like about that?