Adam Robbins, senior investment relationship manager at Triodos Investment Management, offers his view as to why transparency is so important when you’re exploring the many shades of ‘green’ impact investments.
Globally, there are undeniable changes shaping our future, such as climate change, ecosystem collapse, population growth, and scarcity of natural resources. Add to those the impact of the Covid pandemic, which has magnified a need for change, and its often difficult to understand why investors wouldn’t consider whether their investments would help or hinder a better future for all. To keep the tide turning, these global challenges need the kinds of investments that are not just branded ‘green’ or ‘ethical’, but that truly make a difference.
Investors who identify with ethical, green or impact investing can’t fail to be delighted with its recent and continued growth. According to the Global Impact Investing Network (GIIN), the impact investing market has seen phenomenal growth in the last few years, with the latest stats measuring in at over $715billion globally.
While this is an incredibly positive development, it does raise some eyebrows. Investors should look at this number both with optimistic enthusiasm, as well as a critical curiosity. Rapid growth puts the impact investing market at risk of lowering its integrity. We now observe a market flooded with investment funds labelled as ‘green’, ‘ethical’ or ‘impact’; however, if you pull back the wrapping, you might be surprised that these funds’ credentials do not always stack up.
In addition, investors are actively calling for greater transparency. Seven in 10 UK consumers say banks and financial providers need to be more transparent about how they invest their customers’ money, while half think financial providers actively hide the sectors, they invest in.
Admirable as it is to avoid investing in fossil fuels, tobacco or gambling, it only goes part of the way to address some global challenges. Filtering out the bad guys may leave investors feeling pleased they have avoided funding these industries, but, ultimately, they will most likely be frustrated that they haven’t overtly contributed to positive environmental change or helped deliver any new real benefits to society.
Investors need to be aware that while the marketplace has grown, and this has contributed to the diversification of many funds (such as ours which now includes a sterling bond impact fund as well as equity impact funds), it’s also opened the floodgates to a barrage of greenwash. Until sustainable investment terms are defined and standardised at the end of this year (because of the EU Taxonomy), investors should gather knowledge to consciously decide the kind of impact they want to make with their money.
But what kinds of questions could they ask? Fundamentally there are two main questions:
- What’s important to me? – broadly this starts with the investor establishing the answers to questions like ‘What are my values and how do I want to align my investment to those?’ along with ‘What are my investment needs and what is my risk appetite?’ The investor can paint a picture of what they are looking for out of an impact investment so it’s clear what the right fit might be from the start.
- Is this the right provider for me? – investors exploring the marketplace should look for a provider that they trust, whose vision aligns with theirs and is clear on what kind of impact they are seeking to make with the investments.
And, finally do they understand the investment risks and opportunities involved with each underlying holding, to deliver the best possible management of investors’ money?
We can say proudly that investors in the Triodos Impact Investment funds know green means ‘dark green’ when they chose to invest with us. Triodos only offers investment products that benefit people and the environment, while building a healthy financial future. This goes hand-in-hand with our proud heritage as one of the pioneers of impact investing, our 100% transparency on all the companies our funds invest in, and our strong shareholder voice which encourages greater sustainability practices and policies with companies in the fund portfolios.
The promotional information in this article is not financial advice, and if you are unsure about whether any investment product meets your needs then you should seek the advice of an independent financial adviser.
For more information about the Triodos Impact Investment Funds please visit the Triodos website.