Responsible investing - What are ESG funds?

Through responsible investing, humanity can continue to work towards a brighter tomorrow. ESG funds (environmental, social, and governance) are a set of measurements put in place to assess the ethical values and practices of an organisation to ensure your investments are sustainable.

In a world facing the catastrophic threat of climate change, enterprises need to recognise the immense responsibility that rests on their shoulders, which greatly affects the current investing landscape.

Read on if you wish to find out more about ESG and how investing your pension into them can make an impact that resonates worldwide.

What do ESG funds consist of?

ESG funds (also sometimes referred to as sustainable investment funds or ethical investment funds) are essentially investments that consist of enterprises that put environmental sustainability, social responsibility, and governance management first.

The top ESG funds in the UK tend to integrate ESG into their business model, and they will know how to manage their risk.

Conversely, companies known to pollute, put a huge strain on the planet’s energy resources, or operate unethical working environments will have an incredibly low ESG rating.

How are the principles of ESG measured?

The ESG ratings rank companies against the criteria in place, making use of annual reports, media coverage, investment analytics, and management data.

Generally, environment-based considerations are addressed first.

This might include a company’s rate of greenhouse gas production or its water consumption and what methods they have in place to reduce the size of their carbon footprint.

The social aspect of ESG might be measured by looking at an enterprise’s attitude toward pressing matters in today’s workplace, like diversity, equality, and inclusivity.

Governance could pertain to a business’s management strategy and the way it treats its employees, who its partners are, what its political affiliations are or what its workplace happiness index is.

Often, ESG scores will be delivered by expert researcher organisations that carry out independent assessments.

These ratings provide guides for investors who wish to adjust their focus toward developing a more responsible portfolio.

What are the benefits of ESG funds?

ESG could provide investors with some wonderful benefits, not least of all being peace of mind from investing in ethical enterprises.

If you decide to invest through the lens of ESG-oriented stocks, then your return could be more than just monetary; it could have a meaningful and direct impact on the world around you.

This added dynamism is an exciting addition to a portfolio, and the ESG method of investing might be more relevant than ever before as more companies are starting to recognise the weight of social responsibility.

Failing to recognise this responsibility might prove disastrous for a company’s brand image, especially when consumers are more aware of ethical issues influencing their buying decisions.

This could, in turn, influence the popularity of an enterprise’s stocks, changing its inherent value.

This means ESG provides the potential for long-term growth, as the governance part of the metric seeks to identify companies that run efficiently and ethically, possibly securing a more reliable return investment for you.

How can we help?

With iSIPP, you can consolidate your pension into an easily manageable, investment-ready account that you can access easily via our excellent online platform. We’ll always make sure that the information you’re provided with is transparent and easy to understand, whether you’re investing in ESG funds or not.

However, this isn’t all. As a Financial Conduct Authority (FCA) regulated company, we are also a reliable choice as an ESG fund provider. We work closely with established fund managers such as BlackRock who align with our core values. When you invest in your ESG fund, provided by BlackRock, you get the benefit of resilient strategies.

You can read more about our ESG funds by clicking here.

Should You Consider ESG?

If you have a passion for sustainability and you want to witness a meaningful return on your pension investments, ESG funds are certainly worth keeping your eye on.

Disclaimer 

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.