Ethical Investing  

Guide to responsible investing

  • Identify what greenwashing is
  • Explain the fixed income context for ESG investing
  • Describe what Emsa has to say about ESG investing
CPD
Approx.60min
Guide to responsible investing

Introduction

Responsible investing has moved much further up the investment agenda, as climate change becomes more evident and campaigners become exasperated at the lack of government action.

Much of this is seen as a practical initiative: governments may not want to do anything substantial about climate change, but for companies who are committing investors' money, they want to ensure that the business whose shares they are buying is likely to be around for the long term.

There is also regulatory pressure. As part of Mifid II, advisers have to take environmental, social and governance factors into consideration when examining a client's investment desires. Ultimately, the investment has to be suitable, but advisers have to have the conversation.

The days of whether ESG investing is worthwhile financially are long gone. Now there is so much money piling into ESG investments, and investments with a 'responsible' tag, that it seems every fund house is trying to market an ESG fund.

This inevitably lays the ground for some cynical marketing of funds that purport to be ESG-focused, in that they have investments in socially or environmentally responsible companies, but that still have some non-ESG stocks in them.

This process is known as 'greenwashing' and is something many advisers should be aware of.

Another aspect to all this is the active/passive debate.

Some have argued that ESG investing is a deliberately active process, and is how the active sector can distinguish itself from passive, by having to properly research their stocks and take a view over which ones will bear fruit over the longer term.

But the passive sector has started to eye up the ESG trend, and a few providers have started to produce passives indices for those that want a passive exposure to this sector. 

Ultimately, this is one area where the fund industry is taking a positive approach; even if it comes down to simple economics and response to customer demands, the investment industry's embrace of responsible investing is a worthwhile counterbalance to all the saga over fees and hubristic star fund managers.

Melanie Tringham is features editor at FTAdviser and Financial Adviser

In this guide

CPD
Approx.60min

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. What is greenwashing?

  2. According to David Baxter ethical passive indices have ourtperformed their non-ethical counterparts, true or false?

  3. Why is it difficult for there to be ESG securities in fixed income indices?

  4. What did Esma say about ESG investing, according to Nick Reeve?

  5. What does Darius McDermott in Craig Rickman's article say about ESG investing?

  6. Growth stocks have led market returns in recent years, true or false, according to Craig Rickman?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify what greenwashing is
  • Explain the fixed income context for ESG investing
  • Describe what Emsa has to say about ESG investing

I completed this CPD in

To bank your CPD please complete the form below.

Were the stated learning objectives met?

Why weren't they met?

What did you learn from undertaking this CPD exercise?

Why did you undertake this piece of learning?

Banked!

Congratulations, you have successfully completed and banked this piece of CPD

Already Banked!

You have already banked for this article.

To bank your CPD you must or

Register

One or more questions have been incorrectly answered,
 please review your answers and try again.

Please complete all the above text fields to bank your CPD.

More Investments CPDSee my completed CPDSee all CPD