An international fashion model, a Norfolk farmer and an investment manager walk into a bar, right…. Hang on. That’s not quite right. What actually happened was that this unlikely trio sat around a table in front of a camera and talked about biodiversity and biodynamic farming in an engaging and accessible way.
It’s no joke
If you’re wondering what the punchline is, this is not a joke. It was in fact a webinar I listened to last week that got me thinking on a number of different levels. And once I’d calmed down enough to agree with Husband that perhaps we ought to wait until Daughter number 2 has had a chance to go to uni and come back again before we sell the family silver to buy a pumpkin farm in deepest Essex, I realised how much is changing in the world of sustainable investing.
A lack of showing off
The host of the webinar in question was actually the investment manager, whose special thing is building well-spread-out portfolios of funds that focus on sustainable investing. And who happens to be a woman. I don’t know if her gender is relevant, but I will say that, although the audience was financial advisers and their clients, she didn’t once use the occasion of the webinar to “sell” her services. In fact, I don’t think investing was mentioned at all. The subject matter was the soil. The way we grow things and the way we use things. There were a couple of references to companies who are doing good things in this ‘field’ (there’s the joke!) but by and large this was a discussion about the fundamentals of sustainable living. No spreadsheets. No PowerPoints. No graphs. And no showing off.
Turning over the stones…
I found this approach refreshing. So much of the debate about sustainable investing has, to date, focused on the investing part of that two-word phrase. On the performance versus that of mainstream investments. On the costs. On the names and labels that are being given to them – along with the allegations of greenwashing and, new-jargon-alert: socialwashing. There is a fear that, by going against the historically accepted norms of investing, a ‘sustainable’ investor might be being foolish in some way. That they have forgotten to turn over a stone under which lurks a glaringly good reason why they should in fact be investing in companies that pollute the atmosphere, exploit their workers or overpay their Fat Cats.
…to check for values
If you are an investor who believes in backing sustainability, you do still need to turn over those stones. But I think what you are checking for is whether you can trust that the managers of these funds have the same values as you and that they will keep those values central to their investment decisions.
From labels to lawn mono-cultures
On this point – and hot off the press – the financial regulator has just published some long-awaited rules about how investment funds who claim to invest sustainably will have to label themselves going forward. And what they will have to do to prove that they deserve the label they give themselves. This will go some way towards helping build consumer trust in these types of investments. But to my mind, knowing that the investment specialist cares enough to devote an hour to talking to two passionate individuals about the dangers of toxic fabric dyes, unplanted fields and lawn mono-cultures says a lot more about how they will look after your money than a series of charts projecting risk-adjusted annualised returns.
Offering what the world of the future needs
Don’t get me wrong, those returns are of course important. But for the experts in this area, there is a sense that a long-term investment portfolio that is focused on sensibly-run companies that either contribute to a sustainable future or – at least – do no harm, will produce acceptable returns almost as a by-product over the long term. The idea is that these companies are doing the right things to ensure they will be around in the future. And that they will be offering what the world of the future needs.
Sustainable resolves have been well and truly tested
It’s worth pointing out here that people who have been investing in these sorts of funds or portfolios during 2022 have had their resolve well and truly tested by some fairly severe underperformance (in other words, their investment values have fallen by much more than the values of non-sustainable investments). Not being invested in oil and gas has been a bitter pill to swallow this year as the prices of these companies have benefitted from short-term spikes in profit. Other sustainable investments that offer longer-term growth have also suffered as the price at which they can borrow money to grow their businesses has gone up.
Different returns from the mainstream…
But that’s the point of this kind of investing – you have to know that the returns will look different from those in the mainstream. Remember 2020? When we thought that was the end of international travel and plastic-lined shopping delivery trays? Sustainable-focused investors were doing high kicks in their kitchen-cum-office-cum-classroom while the fossil-fuel backers were crying into their disposable tissues and drowning their sorrows in social isolation.
…is neither right nor wrong
Different returns doesn’t mean wrong. And it doesn’t mean right. You invest in this way because it is what you believe in. Because it is as important to you to know that your values are reflected in your investments as it is to know that your financial needs are going to be met.
No bias towards the mainstream
I’ve talked in the past about my thoughts on why women seem to be showing more of an interest in sustainable investing than men. For now, I have tended to put it down to the fact that more women than men are not currently investors, and so are coming at this without any bias towards the mainstream. Then there’s the fact that sustainable investing comes with relatable, real-world stories, which stick so much more readily in the mind of a newbie investor than performance data and returns chatter.
Wider considerations than the numbers
I still think these are probable explanations but I’m reminded of a quote from one of the attendees of my ‘Women save, men invest’ workshops which went along the lines of “the men are focused solely on whether the numbers have gone up or down whereas I just want to know that there’s enough money in the account to pay the term’s ballet fees”. I think it’s fair to say that if you view investing as something at which you need to be ‘the winner’ then you are less likely to be concerned about where your growth has come from. But if investing is about making your money work in a way that you are comfortable with and that allows you to get to where you want to be, then you will have wider considerations than the mere numbers.
You want to reap what you sow
Most of us are not investment professionals and have to put our trust in those who are. When you are only interested in the numbers, it’s an easy gig for the managers in charge of your money to show you graphs and charts and pretty lines going up (or down). When it comes to sustainable investing, however, there is more to prove. Yes, the new labelling system will help, but we also need to see more of these wider discussions that remind us that, although investing is an unpredictable business, when it comes to representing your values, you want to reap what you sow.
www.talkingfinances.co.uk/blog/
Talking Finances is a trading name of Talking Finances Ltd. Talking Finances Ltd is an appointed representative of Parallel Lines The Advisor Collective Ltd, No.2 Sopwith Court, Slough Road, Datchet, Berks SL3 9AU, which is authorised and regulated by the Financial Conduct Authority. FCA Registration No. 967228
- This article represents the personal opinion of Carole Haswell only and does not represent any opinion of Parallel Lines the Advisor Collective Ltd. Financial decisions should not be made on the basis of this article
- Past performance is used as a guide only. It is no guarantee of future returns.
- Your investment can go up and down and you may not get back the full amount invested.
