Introduction to Responsible Investing
Do you consider how much plastic packaging you and your family use; whether there are micro beads in your face wash; the possibility of slave labour in the supply chain of your favourite jeans; or the lack of diverse role models in government and big businesses?
Are these topics of discussion at home or at school?
Environmental and social and governance issues are also an increasingly important input into investment decision making. From a standing start in 2006 there are now over 3’000 signatories to the Principles for Responsible Investment representing over $100 trillion assets under management. These signatories commit to integrate environmental, social and governance issues into their investment analysis and decision making and to be active owners.
Responsible Investment is an area of the investment industry where teams are growing rapidly as asset managers and ancillary businesses invest in understanding both the risks and opportunities inherent in long term environmental and social trends. This type of information can be used to help fund managers design strategies that are a ‘win-win’ and will have both competitive financial returns alongside positive environmental and social outcomes, as well as strategies that are more philanthropic in nature and address societal challenges rather than generating a competitive financial return.
If you are considering a career in Responsible Investment your first task should be to understand the different investment strategies which exist and define some of the key terminology. I have always found the ‘Spectrum of Capital’ by Bridges Fund Management a very helpful tool.
You can find a copy of the Spectrum of Capital on the UK National Advisory Board on Impact Investing website which provides a number of additional helpful resources.
The second task is to consider which part of the investment community you would like to work in. A list of a few areas is below (you will find more in your research):
- Dedicated responsible investment team member at an investment manager
- A generalist investment analyst at a firm which is committed to investing responsibly
- A researcher at a specialist data provider eg MSCI, Sustainalytics
- A consultant to investors or asset managers eg Mercer
Finally, if you decide to pursue a career in this area it’s important to a) keep up to date and b) consider how you can learn by taking action with your own investments.
Some of my recommended sources of information:
- ESG Street – a daily newsletter summarising ESG headlines.
- FT Moral Money newsletter (behind a paywall, free 30 day trial available)
- ESG Clarity – a platform for asset manager content and some journalist articles
- Responsible Investor – an online magazine dedicated to responsible investment (behind a paywall, free trials available)
Finally, keep an eye out for Good Money Week in October. They organise events that you can attend to find out about the industry but also how to manage your own money in a socially and environmentally responsible way. Their website also has some great resources year-round.