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3 tips for women who want to use their money towards saving the planet

We’re sharing the three ways women can try to make a bigger impact on the world with their money.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

If you’re new to the idea, ESG focuses on Ethical, Social and Governance factors. It takes a deeper look into important factors contributing to the wellbeing and welfare of people and the planet.

But why is it important for women who invest?

It’s projected that women are likely to hold over 60% of the UK’s wealth by 2025.

How we choose to use that money, to benefit ourselves and wider society, is in our hands.

And investing ethically is a lot easier than it seems. Here are 3 tips to help you to get started.

Although this article can give you helpful tips on investing, it’s not a personal recommendation. If you’re not sure if something is right for you, we suggest speaking to a financial adviser. With all investments, there’s a risk you could get back less than you put in and past performance isn’t an indicator of future gains.

Tip #1 Decide what ‘ethical’ means to you

One of the most common conversations I’ve had with friends around ESG is how big ‘non-green’ companies dominate ESG funds or rankings.

It’s typical to see big-pharma, tobacco and even mining companies at the top of the ESG list. Because they’re usually the companies doing the most to offset the effects their industries have on the planet - giving them higher ESG scores.

It goes without saying industrialisation has had a hand in the climate crisis, so how does it make sense to invest in organisations that are seemingly part of the problem?

It can feel a bit ‘chicken-and-egg’ in this scenario. It just depends on if you’re happy with these bigger companies that might be causing climate issues, but doing the most to make up for it.

There are different ways to try and invest ethically. From impact investing, through investing in wind farms, or by exclusions, like picking funds that screen and avoid certain criteria like tobacco or pharma.

Choosing how you want to invest is up to you. You could choose a range of options, or you might find one works for your investment strategy more than others.

There’s no right or wrong way to approach it, so find a balance that works best for you.

FIND OUT MORE ABOUT RESPONSIBLE INVESTING

Tip #2 You don’t have to go it alone

When you’re starting out on your ethical investment journey, it can feel a bit like you’re a small stone in an ocean of possibility.

But you don’t have to spend time poring over company reports, to find what’s right for you.

You could think about investing in a fund where the fund managers do the heavy lifting, and split investments across different companies and sectors. You should only invest if the fund's objectives are aligned with yours and you understand the specific risks of a fund before investing.

But if you’d rather pick out single shares instead of funds, don’t just rely on the pledges each company takes towards social responsibility or ethical governance. Investing in individual companies can be higher risk though. You could lose your entire investment if something goes wrong.

It might be the more difficult option since there’s a lot of groundwork to cover. Make sure you’re checking the company’s ESG credentials, like their annual reports, company risk ratings and even materiality maps.

Materiality maps rank issues by industry based on two types of evidence – that investors are interested in the issue, and that the issue could impact companies within the industry. These maps are a good starting point to get a snapshot of priorities specific to that industry.

You can decide from there whether you’d feel comfortable investing in them.

When it comes to building your portfolio, you can choose what really matters most to you. But keep in mind, whether you decide to invest in funds or individual stocks and shares, always make sure you’re diversifying your investments across sectors, geographies, and markets to spread your risk.

FIND OUT MORE ABOUT BUILDING YOUR PORTFOLIO

Tip #3 Invest for the long haul

Investing isn’t a get-rich-quick scheme.

You’ll want to make sure you’re investing for at least five years so you can be prepared for any ups and downs in the market.

If you’re worried about putting your money away for long periods of time, make sure you’ve built up your cash reserves first. It’s known as your emergency cash buffer – it’s a key element of building your financial resilience. We usually suggest having at least three to six months of essential expenditure in an easily accessible account. And one to three years if you’re retired or not earning an income.

Fitting ESG into your long-term investment strategy isn’t just about looking at what a firm is doing now. But also what their future ESG plans are.

It’s typically where ‘Best in Class’ ratings (the ratings used to rank firms for their ESG status) can give you a clue about a firm’s future sustainability factors.

Let’s look at two companies as an example: Company A has clearly defined ESG in its annual report and discloses its long-term strategy for incorporating ESG factors into their future.

Company B doesn’t have a clearly defined plan, so we’re not sure what their ESG plans are, or if it’s on the agenda at all.

If you want both company A and B in your portfolio, but you want to be ESG focused, you could adjust your portfolio to take the above into account.

Make sure to keep an eye on how firms perform each year when it comes to meeting their ESG targets too.

FIND OUT MORE ABOUT ESG INVESTING

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Join the community of women closing the gender investment gap.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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