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Why sustainability is one trend that won’t go out of fashion

Emma-Lou Montgomery, Fidelity Personal Investing, 1 August 2019

Whether you’ve ditched fast-fashion because of its historic association with ‘sweat shop’ labour or its just-as-negative impact on the environment, become vegan, vowed to give plastics a wide berth, swapped your diesel-chugging 4x4 for a cycle, or gone the whole hog and pledged to live a zero waste lifestyle, it’s easy - if not easier - to make your investments just as sustainable. Here’s how.

If you’re female and want your investments to do as much good for the planet as your finances, then you can. And you’re not alone in wanting both either.

According to Morgan Stanley, 84% of women say they are interested in investing for impact and sustainability, and that compares to 67% of men who say the same. And that makes sense. Women tend to reinvest 90% of their earnings back into their families and communities, focusing on education and health in particular, according to research by the World Bank presented at the World Economic Forum.

And if you’re one of these women who wants to grow your wealth, but also know that you’re doing good, then the equally positive news is that you can. And not only can you have both, but you’ll probably find you do very nicely out of it too. Sustainable investing is most definitely this season’s ‘must have’.

There is no longer the trade-off between conscience and returns. In fact more and more investors and the companies they invest in are putting sustainability at the heart of their business.

Today we’re all aware of just how much our lifestyles impact the world around us. We need not be any different as investors. Businesses know that too and are quickly waking up to the fact that they need to put ethical, sustainable and governance issues at their top of their agendas if they want to attract investors and grow profits.

Big corporations are racing to show their green credentials. Fast food giant McDonalds is swapping plastic drinking straws for paper ones. InterContinental Hotels, which owns the worldwide Holiday Inn brand has just said it is scrapping the miniature toiletries from every single one of its 843,000 hotel rooms by 2021. Adidas meanwhile sold one million pairs of trainers made from ocean waste in 2017. While Volvo wants half of its cars to be fully electric within the next five years.

For young fashion designer Alice Early, focusing on sustainability is crucial.

She has chosen to 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 Alice has found clear 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.

I asked Fidelity’s Ned Salter, Head of Equities and Marty Dropkin, Global Head of Research, if sustainable investing really is as potentially beneficial for investors as it is for the environment, and the answer was a resounding yes.

What was evident 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.

For businesses the benefits are plain to see. For us in our daily lives, the steps we need to take are just as evident.

As an investor, the best way to weave sustainability into your investments 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.

More on ESG investing

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. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. 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.

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