ESG investing. It’s not been plain sailing!

14 October 2021

Ethical investing is nothing new. However, from the historic days of it being an unusual choice of investment strategy, the investment market has moved on well and there are good investment funds out there showing consistent and firm returns over the medium term. Very encouraging, although as ever we must add in the caveat that past performance is not a guarantee of future performance.

Since the beginning of this year, EU rules have required advisers to check with clients their views on ESG investing. This rule may well apply to UK advisers in the future. That stands for Environmental, Social and Governance, in placing a layer of screening on funds to meet an investor's requirements, whatever their personal preference may be. I have added nothing new in these notes to what can be found in the pages of this website, noting that funds can be invested in the home market, or overseas, to suit an investor's attitude to and tolerance for investment risk.

However, this is my take on the current situation, which some may argue is outdated. The main issues are marketing noise and potential greenwashing. Greenwashing is effectively dressing - in this case investment funds - to make them look environmentally or ESG friendly and attract you to invest your hard-earned cash, when the reality may be different. This is of course disappointing and has, I believe, led some to delay implementing an ESG investment strategy until the position from fund managers and their assessors becomes clear. The team at Chapters Financial, via its Investment Committee, has created an investment panel of suitable style funds to potentially bridge the gap between the market noise that we receive daily, and the funds that we need to be focusing on.

We have also noted that in our experience, many investors are keen only to allocate a proportion of their funds to ESG investing. Almost a 'try before I buy' approach, with any potential proof being achieved in future investment reviews, in the form of returns, or ESG impact, or indeed both.

To be clear, there are some good ESG focused investment funds available, and these are fully accessible. However, the maturity of this market, when the possibility of greenwashing should be minimal, may be some time away.

Whatever your requirements are for your investments and any screening you wish to place on them, please do talk to the team at Chapters Financial for your objectives. No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

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