Paper bags, plastic bricks

17. September 2020

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: Paper bags, plastic bricks

Pictures of sea birds entangled in the bands of a face mask last week reminded us that plastic is back on the agenda. Unlike some of the overarching sustainability themes such as global warming or unfair trade practices, the direct effects of throwing away plastic hit home with immediacy. We know we use plastic and we know that we throw it away. When we see items that look very much like the ones we have touched with our hands turning up in places they shouldn’t, it gives us a slap. Which is why, I think, the plastic bag revolution of the past couple of years has resonated with consumers more than, say, the need to change our driving habits, or to question the source of every item in our baskets. The problem is literally staring us in the face and so, quite hard to ignore.

Today’s story has plastic running all the way through it.

Privately owned tiny brick-maker, Lego, has announced it is to start replacing its single-use plastic bags with paper ones that will be recyclable. Unphased by the current pandemic, Lego is building on its long-running popularity as its play sets continue to provide ever more children (and adults) with a much-needed indoor occupation. Lego cites letters from children supporting the move away from plastic bags – on both environmental grounds and because they are apparently easier to open – as the reason behind the announcement.

Tinkering around the edges

Now, the cynical amongst you might see this as tinkering around the edges. Isn’t this a bit like Shell expecting applause for delivering diesel to the pumps in lorries that run on solar power? This is a company that does nothing but make small bits of plastic that have no practical purpose other than to provide entertainment. And, as any family will know, those elaborate sets with all their dinky little add-ons and clip-ons that make them so appealing to every miniaturist out there are always missing a piece or two when you pull them back out of the cupboard. Which inevitably means they must be turning up in places they shouldn’t be.

The virtuous circle

So, do we applaud Lego for taking the first step towards a sustainable future, or do we shun them? Well, the first thing to note is that this is a private company and therefore has no accountability to public shareholders. But it does have accountability to its customers – hence the letters from the children. I have talked about the virtuous circle before (Trust in Trees) – one that is fed by the need for public companies to score well on sustainability so as to appeal to those who want to be invested in the companies of the future. Just because in this case it is children, rather than investors, who are applying the pressure doesn’t make it any different.

An easy shot

This is presumably why Lego has also set a target for making its products from sustainable materials by 2030 (apparently sugar cane is playing a part in this – another winner for the children!). Yes, switching its plastic bags for paper ones is a quick and easy shot for Lego and one that doesn’t fix the enormous problem of all that plastic. But it is also a quick and easy shot to slam the company for historically using plastic in its business in the first place. Consumers can, of course, vote with their wallets, but they, just like shareholders, can also apply pressure on a company to make the sort of changes that are needed for a sustainable future. If Lego is serious about listening to ‘the kids’, it will do everything in its power to find alternative materials for its product and deliver on that 2030 target.

Brick-by-brick changes

At the core of many sustainable investment options is the aim to support companies that are embracing change away from harmful materials and practices (that and making money, obvs). It is unrealistic to expect all the necessary changes to come overnight, but we might dare to hope that a new world can be built – tiny brick by tiny brick.

16 September 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

Back to life, back to reality

11. September 2020

Carole has a 1980s’ classic on the brain and recognises that, with the children back at school, there are lessons to be learnt about accepting risk in our lives – whether that comes from the playground or the stock markets

Finally!

On the day my teenagers went back to school I found myself inexplicably humming that Soul II Soul classic up there in the heading. Clearly something in my subconscious recognised just how apt those lyrics were for the day: “La la la…la la di da da da…back to here and now-ow-ow…” – you get the idea. Pictures of gin-soaked parents crying out in jubilation that here was a day that resembled ‘a normal we once knew’ were doing the rounds on social and there was a collective, middle-aged sense of “Yass! Finally!”

Gutted

Three and a half school days later and Daughter number 1 is sent home to self isolate for a fortnight as someone in her form has tested positive for Covid-19. Personally, I don’t mind (don’t tell her, but I quite like having her around), but for her – I’m gutted. This is the year she and all her friends turn 18. In the coming weeks and months there should have been gatherings, parties, moderate drunkenness, snogging (ahem, every cloud…) and whatever rites of passage would have floated their respective boats.

Life isn’t fair

Instead there is frustration and disappointment. This is little more than a gentle reminder for us, the grown-ups, that we live with uncertainty. But for 17-year olds who have had things relatively easy thus far, it feels like a brutal smack around the face. They didn’t sign up for this – which is why they’re not aware of the small print telling them in no uncertain terms that life isn’t fair and that living comes with risk.

The risk of death and disruption

In its most general sense, risk is uncertainty – which in itself isn’t necessarily bad. But, colloquially, we do tend to layer it with negative connotations. When we decline the offer of a free bungee jump off the Grand Canyon because it is ‘too risky’, we mean we think we might maim ourselves or die doing it. We are weighing up the possibility of experiencing the ‘thrill of a lifetime’ against the uncertainty that we will live to tell the tale. By sending the children back to school, we – as a society – are aiming for a generation of children who have been educated to an acceptable standard. The associated risk is that a medically unchallenged virus will spread further into our communities causing death and disruption.

Why not just play it safe?

In an investing sense, risk is the uncertainty of whether you will get your money back. By taking on risk you are laying yourself open to the possibility that you could lose out. So, why would we do that? Why wouldn’t we just play it safe by staying on the ledge with our feet planted firmly where we can see them? Well, there are a few reasons, but one of them is that, along with the certainty that you won’t lose out comes the certainty that you won’t gain anything either.

Test the rope and take the leap

When we view risk as the trade-off for the possibility of something good, we can be more accepting of it. There are common-sense limits to this, of course. No ‘possibility-of-something-good’ is ever great enough to overcome the ‘possibility-of-something-disastrous’: if a bad outcome will lead to ruin (or anything close) then the risk is undoubtedly too high to contemplate. But if the ground we’re standing on doesn’t feel solid enough to support us going forward, sometimes the best thing we can do is test the rope and take the leap.

Certainty that the money will be there

Regular readers will know I often speak of the reasons why women shy away from investment risk. One of these is directly linked to our ‘lesser’ wealth – when you don’t have much spare at the end of the month you focus on budgeting for the here and now (back to Soul II Soul, again!) – or, at the most, for emergencies in the near future. Savings that might be called upon at any given moment because the boiler has broken, or there is an unexpected school trip that everyone else is going on, must be kept in the safest of places – which usually means a deposit account in a reputable bank or building society that is protected by the Financial Services Compensation Scheme. This gives you certainty that the money will be there when you need it.

Safety has its downsides

If you are saving for something more long term, however – even if it is for nothing more specific than a bit of extra spending for when you are retired – you have to factor in the risks of not taking any risk. Leaving your money in a ‘safe’ place for ten years or more exposes you to two main downsides:

The risk that inflation will be greater than the interest you are earning. This means your money in 10 years’ time will not buy you as much as it can now
Your money will not ‘grow’

With the prospect of growth comes the risk of loss. You have to weigh this up against the certainty that your money will not be worth any more than it is today if you play it safe.

Minimising risk

We balance risk every day in our lives. Sending the children back to school is a risky thing to do – even if the risks to the younger generation are not so stark, we have others in our communities that will feel the impact of these mass playground gatherings. But we square that off by doing everything we can to minimise the risks. Social distancing, hand washing, meeting grandparents outside and not hugging them. All of these things are diluting the risks while allowing us to move forward with our lives – albeit with some faltering steps and setbacks along the way.

There are no guarantees but there is possibility

This is exactly how it is with investing. The stock markets don’t always move in the direction we want them to, but by spreading our money over a number of different types of investment we are diluting the risk of a major catastrophe. (I say “we” but, in reality, most of us leave this risk management and ‘spreading out’ to professional investment managers who pool our money in funds – it’s a full-time job!) The idea is that, over time, the companies and institutions that we invest in will grow and will share their profits with us. We don’t have any guarantees about that growth, but we do have the possibility of growth – and that is something that we definitely don’t have when we leave our ‘spare’ cash in a bank account for any length of time.

Back to reality

If we keep the children at home until there is a vaccine against the Coronavirus we risk raising a generation that fails to learn. By sending them back, we are accepting that their education comes with the risk of higher rates of infection – and the risk that these children could be back in the house fighting for the laptop at any given moment. This is just how it has to be. Back to life. Back to reality.

10 September 2020 carole@talkingfinances.co.uk