In a global survey, nearly 60% of young people approached said they felt very worried or extremely worried about climate change (BBC).
Your children or grandchildren may share this concern. Perhaps you’ve had numerous conversations about it already. They feel strongly about protecting the environment and are worried about other global issues too, like social inequality.
These concerns are shaping their behaviours, especially when it comes to their finances. They’re careful about where they put their money – the products they buy and the companies they support. And they’re starting to think about the impact of their inheritance too.
Leaving a positive legacy
Your ethically-minded children will likely sleep much easier at night knowing their inheritance has had a positive impact on the world.
They’re already making more responsible decisions about their own investments. Research carried out by Opinium for Prudential found that 60% of Millennials, 44% of Gen X and 35% of Baby Boomers confirmed that their appetite for sustainable investments has increased since the pandemic (Prudential).
What is sustainable investing?
Sustainable investing describes a range of investment activities, including socially responsible investing, impact investing, green investing and ethical investing.
There are differences between these investment activities. For example, green investing is using your money to support companies that are focused on fighting climate change. Whereas socially responsible investing would involve companies on a mission to help people and communities. As you can imagine, there’s a lot of common ground for these investment approaches, and they’re all focused on using your money to try and generate profits while also having an impact on important global issues.
To invest sustainably, typically you’ll work with a financial adviser who’ll help you choose the right sustainable investment fund to achieve your goals. Sustainable funds often consider ESG factors as part of their investment process. ESG stands for Environment, Social and Governance. Businesses with excellent ESG credentials typically make up a sustainable fund.
Leaving a positive legacy
Your ethically-minded children will likely sleep much easier at night knowing their inheritance has had a positive impact on the world.
They’re already making more responsible decisions about their own investments. Research carried out by Opinium for Prudential found that 60% of Millennials, 44% of Gen X and 35% of Baby Boomers confirmed that their appetite for sustainable investments has increased since the pandemic (Prudential).
What is sustainable investing?
Sustainable investing describes a range of investment activities, including socially responsible investing, impact investing, green investing and ethical investing.
There are differences between these investment activities. For example, green investing is using your money to support companies that are focused on fighting climate change. Whereas socially responsible investing would involve companies on a mission to help people and communities. As you can imagine, there’s a lot of common ground for these investment approaches, and they’re all focused on using your money to try and generate profits while also having an impact on important global issues.
To invest sustainably, typically you’ll work with a financial adviser who’ll help you choose the right sustainable investment fund to achieve your goals. Sustainable funds often consider ESG factors as part of their investment process. ESG stands for Environment, Social and Governance. Businesses with excellent ESG credentials typically make up a sustainable fund.
Learn more about ESG in our e-book.
Note: a fund is one of the most popular and easy ways to invest. They are an investment where many investors pool their monies and invest in different types of assets, including bonds, shares and property. Funds are run by a manager, who works on behalf of all investors to oversee the fund’s investment strategy and trading activities.
Is sustainable investing as profitable as traditional investing?
It’s an important question. Globally, we’re in a challenging period with climate change and skyrocketing living costs. It’s harder for children and young people to get ahead financially. Investing for your children puts a financial plan in place for their big milestones, including:
- A down payment on their first home
- Emergency funds for large unexpected expenditures
- Pursuing academic endeavours
- Getting married
- Retirement
So, you need to make sure that you can leave a healthy legacy, which begs the question, how risky is sustainable investing compared to traditional investing?
Build a healthy legacy with sustainable investing
Like any form of investing, sustainable investing is about trying to make a long-term profit. Of course, it carries some degree of risk that you could lose money. As with traditional investing, the value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than your original investment.
Investors can reduce risk by spreading their money across different investments. They can also work with an adviser to choose funds made up of businesses primed to perform well in the future. For example, innovators of new technologies, such as alternative energy sources, are attracting funding from governments, helping to drive growth. They’re also attracting more interest and capital from investors as the private sector sees these pioneers as a good bet.
What’s more, big businesses with excellent governance usually have good cash flows, which means they have the budget to invest in developing their business and research and development, once again driving growth.
Then it’s also important to consider changing consumer behaviours. For example, the vast majority of Generation Z shoppers (who will continue to accumulate more spending power) prefer to buy from sustainable brands and are willing to spend 10% more on sustainable products (First Insight).
All of this suggests that sustainable businesses have a bright future, and that investing in sustainable funds may be a solid financial decision. Of course, nothing is guaranteed in the investment world. That’s why we always recommend diversifying (spreading your money cost different investments) when it comes to choosing funds, and a financial adviser can help you do this strategically.
How to avoid greenwashing when investing sustainably
Generally speaking, greenwashing is when a company says it’s eco-friendly when the reality is entirely different. Some companies fabricate claims. Others may introduce an environmentally-friendly change and use this to draw attention away from their unsustainable practices.
Working with a financial adviser can help you navigate the complicated world of greenwashing. First, they’ll identify best in class funds that are most appropriate to meet your investment values. Then the managers running those funds will be scrutinising individual companies through a number of sustainable screening processes, among other things.
This doesn’t guarantee that you’ll avoid greenwashing entirely. But it helps to create a more level playing field that will be next to impossible to achieve on your own.
How else can an ESG financial adviser help?
An ESG financial adviser will spend time understanding your goals for sustainable investing and help you make better decisions about your legacy.
Working closely together, they’ll help you choose which sustainable funds to select based on your beliefs (or your children’s beliefs) and financial objectives. This saves you an enormous amount of time as they do all the legwork when it comes to researching the most sustainable and profitable funds.
What’s more, they can help you reduce tax and make the most out of your tax-free allowances. Also, if your business affairs are linked to your personal plans, they can factor these into your legacy and estate strategy, working closely with any of your other professional advisers to ensure all your planning is aligned.
Leave a lasting gift with Chase de Vere
As independent ESG financial advisers, our advice comes without constraints, based entirely on your unique financial picture.
Our strong sense of accountability and familiarity results in deep, long-lasting relationships. Often, we advise the sons and daughters of our original clients. They trust us because we have achieved great results for their parents and feel confident that similar outcomes are on the horizon.
Learn more about the benefits of working closely with a financial adviser who specialises in sustainable investment in our blog. Or, for a deeper understanding of the world of sustainable investing, download our ebook.
Protect tomorrow’s world with your legacy and make your children proud. Book a meeting with one of our advisers today to discuss your sustainable investment options.