In my post of 12 April 2020 (How long is this sustainable for?) I promised a series of mini-blogs to highlight stories about companies that see the link between the sustainability of their business and that of the planet. I’m giving myself free rein here to look at anything from what big, grown-up companies and organisations are doing to get with the programme, to young, earnest start-ups with ground-breaking ideas – and all that comes in between. Happy reading!

A sustainable story for today: Trust in trees

Lockdown project Number 437 in my household has been to tackle the area of the garden that was, until last week, hidden by a 12ft trampoline. Normally quite at home with a giant pair of loppers, I realised that the enforced ‘grounding’ of the past months – and accompanying nature-appreciation – had softened my destructive urge to ‘cut back hard’. So, at the first sign of rain I headed indoors for a cuppa and a read of the Woodland Trust’s 2019 report that was sitting on the kitchen table – gently replacing the stone I had disturbed so as to let the woodlouse family go about their business again. (Oh, I’ve changed).

The Woodland Trust spent more than £47m last year protecting and creating woods, planting trees and restoring ancient woodland and habitats. That money came from the public, from members, from grants and from people leaving it in their wills. And it also came from companies. It names privately-owned Yorkshire Tea and Premier Paper as big supporters, reports that Lloyds Bank has pledged £36m to the trust to help create masses of woodland and applauds “our great friends Sainsbury’s” who last year planted 150 woods to celebrate their 150^th anniversary.

Companies lining up to get the seal of approval

Obviously organisations like the Woodland Trust welcome generous donations from many sources, but what I think is important here is a possible shift in power. As the spotlight on sustainability glares ever brighter, could they afford to take money from corporate big-shots like Sainsbury’s or Lloyds Bank unless they were sure that these companies were among the good guys? Whereas in the past charitable donations might have been seen as an easy PR exercise for a company, will we now see companies lining up to get the seal of approval from a receiving organisation and – importantly – from the members of the public who support it? Not so much ‘Aren’t we great, we give lots of money away’ but more ‘This organisation has accepted our gift – we must be great!’ Add to this a pressure to fit into a ‘sustainable investing’ category so as to remain popular with investors and you start to see a virtuous circle.

A bit chaotic right now

However, the more I look at this sustainable investing lark, the more I realise what a minefield it is (bad choice of noun, I know). There is genuine conviction amongst many professional investors that the best investments are in good, solid, responsible companies that want to preserve and improve the world so that they can continue to operate in it. But these professionals seem to be having difficulty agreeing on what to call the various styles and approaches and, given the endless factors that come into play, which companies might qualify. It all feels a bit chaotic right now. In the rush to be in the game, it can feel to the little investor at the end of the chain like everyone is creating their own rules. And this lack of standardisation is confusing.

Transitioning to a connected world

What I hope is that this is in fact the transition phase – and that where we are headed is a place where the connections all join up. In this future connected world, investing in companies on the basis of how sustainable they are will become the norm as pressure is applied from all sides to recognise that a company’s products and services come from and go into the very society and environment that sustains each and every one of us. And at this level of connectedness, there would be no need for the likes of you and me to get our heads around the fiddly nuances between labels such as sustainable, ESG, ethical, impact or responsible – it would all just be ‘investing’.

Holding our heads high

Just as trees are connected underground by a network of fungi – sharing nutrients, water and danger signals – so wealth in the trillions is tied up in investments that will have to provide funds for pensions for the retired, job opportunities for the young, medical research, technology infrastructure, climate-change action and…. in short, a future. Companies will need to attract not just an investor base, but also social or charitable partners, employees and future leaders from a generation who will demand to know how their money is being made and whether, by being connected to them, they can hold their heads high up above the canopy.

9 July 2020 carole@talkingfinances.co.uk

All opinions are those of Carole Haswell and do not constitute financial advice

Talking Finances With Women

I’ve a feeling that there is going to be a whole lot of marketing aimed at women around sustainable investing. As ever, there will be a gulf between the promotions coming from on high and the position of non-investors on the ground with questions like: Is this for me, how does it work and why might I need it? This is where I think financial advisers, planners and commentators can all step up, but I also believe it will be stories like these that get us interested in the first place. If you are inspired to take this further, please see ‘A bit more understanding’ below.

A bit more understanding

These Sustainable Investment mini blogs are not about providing investment tips. The point is to flag to you the sort of projects that professionals who invest sustainably keep an eye on. Generally speaking, ordinary folk investing on their own behalf would not be encouraged to invest directly in companies, but to use funds made up of a number of different companies. This way, we can pool our resources and spread out our risk.

The professionals who manage these funds (imaginatively known as fund managers) have exams coming out of their ears and do tonnes of research into the companies they invest in so that you don’t have to. After all, you wouldn’t want to bet your house on a single company that is doing great things as its core business only to find out that it has a side hustle in selling pandas into slavery.

You can think of different kinds of funds like Russian dolls, starting with the ‘company’ at the centre:

The company – an investment in a company could be shares that pay dividends and go up or down in value; or a bond where the company ‘borrows’ money for a set amount of time in return for a fixed amount of income
A fund (aka collective investments such as a unit trust, OEIC or investment trust) – a fund manager chooses the companies they want in their fund. A sustainable investment fund manager would invest in companies that tick the right boxes on environmental, social and governance (ESG) matters
Multi-manager fund – this is another layer of management that puts together a number of funds as a single fund. In a sustainable investment multi-manager fund, the funds chosen would be investing in companies that meet ESG principles
Managed portfolio – a financial adviser or investment manager can put together a collection of funds to suit a particular level of risk and investment preferences (such as sustainable). Unlike the multi-manager funds, the client holds a number of funds, not just one – you would generally seek financial advice for this sort of investment. The manager would make changes to the portfolio (ie switch in or out of funds) either after consulting with the client (called ‘advised’) or at their discretion (called ‘discretionary’)

The funds and portfolios on offer within sustainable investing are growing. Advisers, planners and other financial professionals will be learning about the options available as we go along. If you are new to investing, a good place to start is https://www.moneysavingexpert.com/savings/investment-beginners/ or https://www.moneyadviceservice.org.uk/en/categories/how-to-invest-money. Here you will find helpful guidance and suggested websites where you can do your own investing. More information on the sustainable options is also provided.

Alternatively, please feel free to talk to us about your circumstances at Talking Finances.

Talking Finances is a trading name of Talking Finances Ltd. Talking Finances Ltd is an appointed representative of Beaufort Financial Planning Limited, Kingsgate, 62 High Street, Redhill, Surrey, RH1 1SH, which is authorised and regulated by the Financial Conduct Authority, FCA Registration No. 583233