HOW CAN I BE SURE MY PORTFOLIO IS GREEN AND NOT GREENWASHED?
As the world looks to the UK as Glasgow hosts the 26th UN Climate Change Conference of the Parties (COP26), there is critically an increasing need to understand where money is invested and what the impact could be from an environmental, social and governance perspective. Here, Delyth Richards, who heads the Client Solutions Group, shares some of Kleinwort Hambros’ insights.
What has been driving recent growth in responsible investment? How can you seek assurance that a portfolio will be truly green rather than just greenwashed?
The rise of responsible investing is now clear. The Global Sustainable Investment Alliance notes that global sustainable investment reached $35.3 trillion in five major markets at the start of 2020. A 15% increase in the past two years (2018-2020), constituting a real shift in investors’ priorities. Sustainable investment assets under management make up 35.9% of total assets under management, that is 1 in every 3 USD invested*.
For some years the responsible investment movement has been driven by the large investors of pension funds. However, private investors have a growing voice and companies are providing data to support these enquiries. The past year has reinforced that the social and environmental themes which underpin responsible investing have a direct influence on the future of our society. Increasingly, individuals are seeking to harness the power of capital to effect positive change.
It is often difficult to know whether a portfolio is truly green or simply labelled green. A cacophony of conflicting labelling means that it is not always clear if what you are buying does what it says on the tin! The vast array of jargon and acronyms in this field can be confusing, so let’s define the three main buzzwords.
Ethical investing encompasses negative screening processes to exclude so-called “sin stocks” from portfolios – for example, stocks in companies that generate substantial revenue from controversial weapons, tobacco, gambling, thermal coal and adult entertainment.
ESG – Environmental, social and governance – investing involves assessing and investing in companies that perform well around issues of climate change, labour standard (for example strong commitment to diversity and inclusion) and corporate governance.
Impact investing means investing in companies which have a measurable, beneficial social or environmental impact.
What does responsible investing mean at Kleinwort Hambros?
At Kleinwort Hambros, our portfolio construction is driven by our VaMoS investment process: thorough analysis of valuations, momentum and sentiment. We negatively screen businesses that generate more than 5% of their income from adult entertainment, gambling or have any association with controversial weapons such as cluster munitions or landmines. This is the starting point for all portfolios.
* The Global Sustainable Investment Alliance and Global Sustainable Investment Review 2020 (GSIR)
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NOVEMBER/DECEMBER 2021
businessmag.co.uk
finance
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