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Sustainable investing: a ‘must have’ not a passing trend

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Gone are the days when sustainability was the preserve of wealthy types who could afford to have a conscience. Or dyed-in-the-wool hippy types who wouldn’t dream of living any other way. Today we’re all aware of how our lifestyles impact the world around us.

It’s also big business. Customers are increasingly demanding accountability and traceability and want to know that companies share their concerns - and most importantly are doing something positive about them.

As investors it’s also something that’s increasingly on our radar. And for good reason. As an investor you want to make sure that the companies you invest in are also taking steps to ensure that their people, the resources they use and the methods they adopt are ethical and sustainable.

For the latest episode of MoneyTalk we’ve concentrated on this very important issue. Sustainability is, after all, an essential alongside longevity. And as we’re living longer, we need to make sure that we’re both prepared and the world around us is preserved.

I spoke to Alice Early a young fashion designer who gave some fascinating insights into how the world of sustainable fashion works.

She really has put sustainability at the heart of her design practice in everything from the buttons she uses to the boxes she packages her garments in. And she decided to take that approach after spending a decade in the industry prior to that and seeing the amount of waste produced.

Yes it comes at a cost - both to her and her customers. But what was clear from Alice is that customers are prepared to pay a little more to know that the beautiful clothes she designs have been made by people whose working conditions, pay and so on wouldn’t jar with their own ideas of how workers should be treated.

As she put it: “if something is too cheap then someone else, somewhere further along the line has already paid the price”. And the idea of that does jar with most people today.

And, there’s no doubt that sustainability is big business when it comes to investing and increasingly been demanded by investors. In the latest episode I spoke to Ned Salter, Head of Equity and Marty Dropkin, Head of Research, both at Fidelity International, who explained just how important sustainability is to investors.

Marty commented that it’s moving so fast that it’s sometimes hard to keep up, and that regions of the world that you might, perhaps, not even expect to be particularly focused on sustainability, are increasingly calling for companies to prove their green credentials.

What was evident speaking to Ned and Marty was that there is no suggestion at all that sustainability comes at the cost of profits to investors. In fact, as Ned points out, it’s quite the contrary.

They have proven time and again that sustainable investing can deliver total social returns on top of financial returns. It’s not a case of having one or the other. But, the companies that financially perform the best are also the ones who perform well on ethical and sustainable measures too.

As an investor it can be hard to know that you are investing in sustainable companies and that’s partly because there is no set standard of sustainable investing. People talk about environmental, social and governance issues and they’re all important.

The best way of looking at is to see it as a set of principles that are added into the investment process. This isn’t about choosing to invest to make your money grow or choosing to take a sustainable stance. Add sustainable principles into the mix and you will have an investment that successfully delivers financial returns and total social returns. 

To hear what they have to say, take a look at the latest episode of MoneyTalk in which Ed Monk also talks about making your retirement pot last longer in a world of rising prices and Dan Lane looks at how easily-swayed we can be when it comes to making decisions; both essential topics for today’s investors.

If you want to find out more about sustainable and ethical investing, our new ESG hub is the place to start. Keep your eyes peeled there for an extended interview with Ned Salter and Marty Dropkin coming soon and also look out for tomorrow’s MoneyTalk podcast, in which we discuss the important of sustainable investing and Ed Monk also speaks to Fidelity’s Michael Clark, manager of the Enhanced Income Fund; offering investment alternatives in this uncertain world.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. The Investment Manager’s focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that at times compares unfavourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.