Up until recently if you as a client had asked for an ‘ethical’ investment fund, we might have been advising that you were leaving some money behind you in order to ‘salve your conscience’.
However the data now tells a different story and Peter Smith, Investment Director of Aviva Investors, is championing their environmental, social and governance philosophy – and now boasts success in terms of beating performance returns benchmarks.
What is ‘ESG’ investing?
In very basic terms ESG Investing involves investing more in companies that are embracing Environmental, Social and Governance factors in order to build for a more sustainable future
Previously when evaluating companies investors would have only looked at things like the companies profitability, it’s revenue growth and lots of other financial metrics.
Now, as investors, we also evaluate companies from an environmental front – could they have lower carbon emissions targets; from a social aspect – should they have better working practises for staff? From the governance side of things – should they have a better policy around board diversity?
In short, we want to ultimately invest more in companies that are committed in doing good both for their shareholders and the world around them.
ESG Funds Performance
In the past investors have felt that they needed to sacrifice performance in order to investment more responsibly, this is no longer the case as seen below.
Aviva Investors have their own ESG proprietary scoring system and score every company in their investment universe. When we compare the top third of ESG companies versus the bottom third of ESG companies, the difference in performance is very interesting.
Investing responsibly is not a fad. It is now a strategic philosophy.
By building responsibility into all our investment processes, we aim to improve our risk management and investment performance while at the same time help to create more sustainable investment solutions fit for the future. As an active owner of capital, our scale and influence help us drive the change required to build a future our clients are able to retire into.
At Aviva Investors we integrate ESG into everything that we do, we build it into our funds and our mission is to;
- engage and meet with global companies to encourage them to change
- build sustainable businesses for the future
- be at the forefront of encouraging overall market reform, helping to drive regulatory change.
Case Study Example: How Aviva Investors helped persuade Unilever to reduce plastic packaging
One example of how we put words into action to make a difference is the way we engage with companies that we invest in on behalf of our investors.
In 2020 we engaged with Unilever, with a range of over 400 brands and with over 2.5 billion people using one of their products on any given day, they are one of the world’s largest producers of plastic packaging. We meet with Unilever and together with other investors we encouraged them to do more to reduce the amount of plastic they produce.
The outcome of our engagement with Unilever is that they committed to;
- reduce the amount of plastic they produce by 50% over the next 5 years
- by 2025 they aim to collect and recycle more plastics than they sells
- by 2025 they aim to ensure that 100% of the plastics they produce are either recyclable, reusable or compostable.
As investor in Unilever we will continue to work closely with Unilever as they set example by proactively driving change in their industry.
According to the Make My Money Matter, a campaign which aims to shift £3trillion in pensions towards a more sustainable future; a sustainable pension is 27 times more effective in reducing carbon emissions than never flying in a plane again and becoming a vegan for life!
‘Non-negotiable’ Ethical Investing Standards
Whether investing in equities, bonds, real estate or infrastructure, integrating ESG into our investment decisions and being responsible stewards of clients’ assets is non-negotiable.
With over €300 trillion invested in capital markets the financial industry can really make a difference by driving companies to address climate change, to seek better governance and become aware of the impact they have on society.
Ready to build your sustainable investment portfolio?
Whether you are an individual investor or looking to set up a company pension scheme for your staff, contact Philip Doyle or Ian Heffernan of Ocean.ie for expert independent broker advice.