Feb 02, 2024

Our insights

The days of set and forget investing without a conscience are rapidly coming to an end.

Many investors are now determined to put their money not just where their mouth is but where their heart is.

While world economies and markets faltered through the COVID-19 pandemic, many sustainable investments began outperforming their more traditional rivals.

The sustainable investment market has more than tripled over the last two years to $19.9 billion and is predicted to reach $100 billion by 2025 according to the Responsible Investment Association Australasia.

At industry level, companies are scored on the following five sustainability variables:

• Greenhouse gas
• Land use and biodiversity
• Toxic spills and releases
• Operational waste
• Waste Management

Addressing emissions is also a key factor in sustainable investing with companies rated on the intensity of their greenhouse gas emissions and their potential emissions from reserves.

We have arrived at a place in time where the majority of people want to leave the world in a better place for their children.

Whether you are passionate about climate change, the environment, social issues or corporate responsibility, the ability to invest sustainably and ethically is now a viable option.

It comes with that ‘feel good factor’, supports companies that support sustainability and helps shape the future of the planet.                                                

Why it is important to invest sustainably and ethically

Global impact 

High income earners have a bigger say on the future than anyone. The investment choices they make directly affect the balance of power around the world and the decisions made in the boardrooms of its biggest companies.

By allocating capital towards sustainable and ethical initiatives, investors send a direct message about the importance of environmental and social change.

Long-term financial health 

Sustainable investments are not just morally sound, they also make great financial sense.

Companies with strong environmental, social and governance (ESG) practices are often better positioned for long-term success, reducing investment risks and increasing financial returns.

Changing investor preferences 

High-income earners are recognising that aligning their wealth with sustainable principles is not only responsible but enhances their reputation and legacy.

They do this by reducing and or excluding investment in companies associated with the following issues:

• Factory farming
• Cluster munitions
• Nuclear weapon systems
• Personal firearms
• Tobacco
• Alcohol
• Gambling
• Child labour
• Adult entertainment

How to invest sustainably and ethically

Define your values and goals 

The first step in investing sustainably and ethically is to ask yourself what moral issues you are passionate about.

Defining your personal ethical priorities will help guide your investment decisions towards sectors where you can maximise your impact.

Research your target companies 

As with any investment, it is important to thoroughly research the company. 

In the realm of sustainable investing, that means investigating its ESG practices to ensure it has a genuine commitment toward reducing carbon footprints and maintaining strong governance structures.

Engage with companies 

This shows a company you are not just a passive investor.

By participating as a shareholder, you can encourage positive change in corporate behaviour and contribute to the development of more sustainable business practices.

Impact investing 

This is an investment intended to make a measurable social and environmental impact.

Unlike philanthropy, impact investing is also designed to make a positive financial return.

It then monitors and reports on the impact of its investment to relevant stakeholders.

How CWM can help you invest sustainably and ethically

Investing sustainably and ethically aligns with CWM’s broader investment approach.

The same basic investment principles are observed but tailored towards companies that have a proven record in sustainability.

Those principles are:

Let the markets work for you 

Millions of people buy and sell on the markets each day and the real-time information they glean helps set prices.

Invest, don’t speculate 

After fees, very few money managers outperform the market over time.

Take a long-term approach 

Always play the long game. Markets have consistently offset inflation over the long term.

Consider the drivers of returns 

Academic research has identified these equity and fixed income principles which can be utilised with confidence in cost-effective portfolios.

Practise smart diversification 

Diversify not just by security but by geographic and asset class to reduce risk.

Avoid market timing 

Attempting to predict short-term fluctuations in markets inevitably ends in failure and loss.

Manage your emotions 

Avoid knee-jerk reactions to market fluctuations.

Look beyond the headlines 

Always look at daily market news with a degree of scepticism and understand that much of it is opinion-based.

Keep costs low 

Over long periods, high costs can weigh heavily on a portfolio’s return.

Focus on what you can control 

A financial adviser can tailor your investment plan to your personal wishes while alerting you to actions that add to its value. 

Get advice today

The decision to invest sustainably and ethically is a noble one.

But it can also be a very lucrative one.

Calder Wealth Management has a particular interest in sustainable investing and is the ideal choice if you are seeking advice in this field.

CWM works with numerous high-income earners who are strong believers in the wisdom and benefits of investing sustainably and ethically.

We are wealth experts who can work with you to establish and manage your sustainable investment portfolio.

We meticulously research all the companies we recommend investing in and remain abreast and informed of emerging trends, regulations, innovations and changes in the market.

This helps ensure your portfolio always performs to the peak of its capabilities.

No-one should do without a quality investment portfolio professionally managed by a team personally engaged in their wealth accumulation.

At CWM we pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to discuss all of your financial needs and concerns.

Written by James Herriman

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.