Understanding the sustainable investing opportunity

The trend towards conscious consumption and awareness of the impact of climate change has accelerated significantly over the past decade. Globally, the covid-19 pandemic has been a significant catalyst for this increased awareness. In Australia, the pre-pandemic bushfires and more recent flood crises have also made consumers far more aware of climate change.

Mastercard has confirmed these trends with market research finding in 2021 that in Australia, 57% of consumers[i] are more mindful of their impact on the environment since Covid-19.

This increase in mindfulness and awareness of climate change has a significant impact on investment decisions. Investors are now actively looking to how they can positively impact the environment when developing an investment strategy.

But sustainability and concern for environmental impact go far beyond simply choosing to reuse shopping bags at a supermarket checkout line. Investors now have the opportunity to build and hold an investment portfolio that reflects their commitment to sustainability – without compromising investment returns.

What is sustainable investing?

Sustainable investing, also known as socially responsible investing, incorporates environmental, social and governance (ESG) factors into investment decisions. Individuals choose to invest this way to make a measurable environment and social impact – alongside achieving solid investment returns.   An individual's values and priorities influence their investment decision, with investment returns, not the only factor assessed when determining the value of an investment.

Sustainable investing is on the rise globally. The Global Sustainable Investment Alliance reports that assets under management that follow a sustainable investing strategy have surged from $30.7 trillion in 2018 to $35.3 trillion in 2020.

What has driven the growth in sustainable investing other than Covid-19?

While the Covid-19 has had a significant impact, according to Ernst & Young, growth in sustainable investing has been driven by millennials who prefer to invest in alignment with their personal values. Growth has also been influenced by evolving macro-economic trends, specifically global population increases and the greater demand this places for food, water and energy. The increasing need for clean water and sanitation, innovation in energy generation and distribution, improved health care and more efficient transportation point to higher long-term demand for sustainable investment growth.

How do you become a sustainable investor?

As with all investing, you must reflect and understand what sustainability issues matter to you as an investor. While on the surface, you might view a reduction in greenhouse gas emissions as a key priority and how an organisation produces its products and services. But other aspects of sustainable investing should also be considered when thinking about your portfolio. These may include how it behaves towards its employees and stakeholders or the broader impact the company may be having on society. This includes how it is helping others to help create a more sustainable future.

Understanding what issues matter to you can then be used to integrate the criteria into the recommended strategy.

Do you have to compromise on investment returns?

The one key question often raised by investors is if their commitment to sustainable investing will negatively affect investment returns. The simple answer is no.

Underlying any effective investment recommendation from IMFG will always focus on sound investment principles. The key to achieving your investment goals is to look for measurable sustainability outcomes within our broader investment framework. Our strategies for sustainable investing always seek broad diversification, efficient cost management, and higher expected returns alongside measurable sustainability goals.

How do you begin your sustainable investing journey?

Whether you are an experienced investor or just beginning your journey in wealth creation, the first important step is to have an introductory meeting with your current advisor or an IMFG wealth creation specialist. At IMFG, our wealth specialists undertake a detailed discovery process to help you understand your investment values and access various sustainable investment options depending on your requirements and investment profile. If you would like to discuss your opportunities for sustainable investing, contact us on 02 9002 or email us at info@imfg.com.au.

 
  [i] “How the Covid 19 Pandemic has Impacted Consumer Attitudes About the Environment”, https://www.mastercard.com/news/media/qdvnaedh/consumer-attitudes-to-the-environment-2021.pdf

Author: Angus Dockrill

Angus is a Director and Wealth Specialist at IMFG. Angus helps people to improve their quality of life and peace of mind by making smarter financial decisions. See his profile here

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