Good Money Week: ESG and investment sustainability

Posted on

Do you consider sustainability when making financial decisions? With Good Money Week starting on the 24th October, which aims to encourage people to think about sustainability when it comes to banking, pensions, savings and investments, now is a good time to learn more.

While sustainability in finance is often associated with incorporating ethics and values, it can help improve your long-term outcomes too.

What is ESG?

ESG stands for environmental, social and governance.

These are the three core pillars that are considered when weighing up whether a company is considered sustainable. All three categories can cover a broad range of areas. The table below highlights some of the things an ESG investor may consider.

ESG investing means you take some of these factors into consideration when deciding where to invest. Rather than simply looking at the financial side of the business, you’d consider how the business operates and its place in the world. This doesn’t mean the financial performance of a firm is discounted, that’s still an important part of assessing an investment even when ESG is playing a role.

For investors that want to incorporate their value into decisions, ESG investing can help. For instance, those that are concerned about climate change may choose to omit fossil fuel companies from their portfolio.

However, ESG can add value to your long-term goals too.

Sustainability and investment performance 

When we’re investing, it should be with a long-term goal in mind. As a result, sustainable firms, which should also consider long-term impacts, can help a portfolio to deliver returns.

Research published in the Financial Times found close to six in ten sustainable funds delivered higher returns than equivalent conventional funds over the last decade. The research looked at 745 Europe-based sustainable funds and found that the majority of strategies have done better than non-ESG funds over one, three, five and ten years.

Sustainable funds’ rates of success varied depending on the asset class. For instance, more than 80% of US large-cap blend equity funds beat their traditional peers over ten years. It was also found that sustainable funds have a greater survivorship rate than non-ESG options. On average, 77% of ESG funds that were available ten years ago still exist. For traditional funds, the figure was just 46%.

Despite ESG values often being associated with lower returns, the findings demonstrate they can add value to investment portfolios.

A survey from Schroders found this is increasingly being reflected in investors’ beliefs too. When asked if sustainable investments are attractive, 42% said ‘yes, because they are more likely to offer higher returns’. This compared to the 11% that said ‘no, because they won’t offer higher returns’.

Hannah Simons, Head of Sustainability Strategy at Schroders, said: “Sustainability does not have to come at the expense of performance, and it is promising to see this manifesting more strongly each year in the data.”

Of course, considering ESG factors is no guarantee of investment performance. Investments will still experience short-term volatility and there is always some risk involved. It’s essential you understand the risk of an asset before investing.

The challenges of ESG investing

Alongside the benefits of ESG investing, there are challenges too. These include:

  • Limited funds: The number of ESG funds available is growing but compared to the mainstream market there are limited options. This can make it more difficult to find a fund that suits your needs and goals. If you want your investments to reflect your values, you also need to keep in mind this is subjective and even an ESG fund may not align with your ethics perfectly.
  • Additional cost: Researching ESG factors means more time needs to be taken before investing. As a result, ESG investing can mean additional costs. When investing through a fund, you may find management fees are higher.
  • Missed opportunities: Avoiding firms that don’t meet your ESG criteria could mean you end up missing out on opportunities. While ESG can create sustainable returns, when you look at it from this perspective, it can harm investment growth in some cases too.

All investments need to consider your goals and situation too. So, alongside ESG factors, make sure you think about your risk profile, investment time frame, and more.

Investing can be complicated, and ESG adds another layer of complexity. If it’s something you’d like to incorporate into your investment portfolio, please get in touch. We’re here to help you understand your investment options and what they could mean for your long-term goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.





    Subscribe to our newsletter