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What do you need to do about ESG?

The case for ESG investing is solid. Better performance and better for the planet so what’s the next step for investors?

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.

In our article Responsible investing – separating fact from fiction, we explained why ESG investing isn’t a fad. It’s simply good, profitable investment sense. So how do you ensure you reap the benefits of environmental, social and governance considerations? What do you need to do about ESG? Well the good news is; probably less than you think.

Fund managers and fund management companies are increasingly recognising environmental, social and governance factors as genuine risks to the long-term success of the businesses they invest in. More and more are building ESG into their existing investment process.

They're doing it at different rates and some are doing a better job than others, but they're thinking about it. Before investing in a company, fund managers consider the threats to that business – its competitors, the regulation which could restrict growth, and the fines that could impair profits. ESG investing is part of this process.

ESG considerations are tough for people in the investment industry to ignore. There's a constant flow of news articles about ESG and our research team receives multiple emails on the subject on a daily basis. Head of Investment Analysis Emma Wall recently met with new Fidelity CEO Anne Richards to hear about her plans for the future – and ESG was the main topic of conversation.

In June, we caught up with Therese Niklasson, Investec's Global Head of ESG. She thinks the progress we've seen so far on investors engaging with ESG is just the start, and there's much more to come.

Therese Niklasson's view on ESG

For the research team, ESG considerations are increasingly part of our conversations with fund managers too and we're looking at ways to better communicate a fund manager's approach to ESG to our clients to meet demand for more information.

What if I want to take action?

If you’re happy to leave ESG investing to the fund management industry to engage with, then sit tight. Change is on its way.

But if you want to be more proactive in your approach. You could go a step further and invest a portion of your portfolio in an ethical fund that screens out companies that cause a negative impact on the globe and society, such as those that produce tobacco and alcohol.

Or you could choose a sustainable fund that invests in companies making a positive contribution. Green energy producers and companies involved in environmental clean-up and recycling are examples.

Good Money Week is as good a time as ever to check if your portfolio is aligned with your investment goals and views. Read on to find our latest investment ideas for investors who want sustainable returns.

This article isn’t advice. If you’re not sure an investment is right for you please seek advice. All investments rise and fall in value, so you could get back less than you put in.

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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