Ethical Investing  

The times, they are a changin’

  • Understand how ESG investing is spreading throughout the investment universe
  • Learn the differences between impact investing and ESG investing
  • Compare the UK experience to what is happening in Australia
The times, they are a changin’


Environmental, social and governance investing has become much more mainstream in the past few years. Since the adoption of the Paris Agreement on climate change three years ago, the presence of environmental and ethical factors in one's investment portfolio has moved up the agenda.

Indeed, it is not just the case that there are now more companies operating in this sector, and therefore more stocks for fund managers to select from. 

ESG factors have made it into the mainstream so that even the big companies see the financial – and political – advantages of not polluting, or wasting precious resources. It seems itis just left to the tobacco companies and arms manufacturers to be the real bad guys of the stock exchange.

ESG investing takes many forms, but its most common is through screening – either positive or negative. One can screen out companies trading or excavating fossil fuels or selling cigarettes, or opt positively for solar panel manufacturers.

Alternatively investors can go for impact investing, where they look for stocks that make a positive impact on the environment or society; this type of investing is starting to gain a strong foothold in the investment sphere, both from a fund selection point of view and in investors’ consciousness. Perhaps it is interesting to look to Australia, where ESG investing has become very popular with consumers.

Funds managed under responsible investment commitments have grown by 40 per cent over the past five years, and more Australian investors are asking where their investments and pension funds are being invested. Certainly as ESG investing becomes more acceptable, and its relationship to mediocre returns is broken, then more people will ask for ESG funds, and the industry will likely respond. 

There are over 190 funds available to invest in and the choice, it seems, is more about: how green are you?

In the UK, ESG concerns are making their way into pension fund choices, and it is now acceptable to use this aspect as a factor for making pension fund investment choices. The days of ESG investing belonging just to the hippy idealists are long gone: it is now firmly in the realm of the respectable.

Melanie Tringham is deputy features editor of Financial Adviser

In this special report


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to Simon O'Connor, why is Australia seeing a big increase in ESG investments?

  2. According to Simon O'Connor, ESG funds are simply screening out negative stocks such as tobacco and gambling. True or false?

  3. Why does Will Oulton, in the article written by Fergus Moffatt, believe ESG factors contribute to strong performance?

  4. According to Fergus Moffatt, what did pension scheme investment guidance from The Pensions Regulator say about climate change?

  5. According to Damien Lardoux, how does impact investing differ from ESG investing?

  6. According to Damien Lardoux, companies making a positive impact are good for investor returns. True or false?

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You should now know…

  • Understand how ESG investing is spreading throughout the investment universe
  • Learn the differences between impact investing and ESG investing
  • Compare the UK experience to what is happening in Australia

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