“I'm in my mid 50's and would like to make sure all my investments, including my super, do not contribute to the fossil fuel industry. Is there some kind of stamp of approval to say an investment is 'ethical'? Can a financial adviser help with this?"
- Question from Sasha in Ipswich, QLD
Top answer provided by:
Daniel Grusd
Hi Sasha,
It's a great question, not to mention highly topical.
Regarding Green investment options, the landscape is certainly not black and white.
The first thing to consider is that there are many shades of green and working out which shade suits you best is generally the first step along the journey. It is often quite challenging to know where you sit on this scale, and one of the significant benefits of engaging with a financial advisor who is well-versed in this topic is the clarity you will gain through the process. In addition, you will better understand what investing green means to you, how it relates to your values and how best to go about investing green to achieve your desired outcomes.
You could begin the process by asking yourself the following types of questions -
Do you currently own or would you consider investing in a bank, even though most banks, somewhere along the line, have likely financed or will finance some fossil fuel-related industry?
Would you consider investing in a company like Ampol if you were aware that even though they have one of the largest fuel delivery networks across Australia, they also plan on using their locations as Electric Vehicle fast charging stations?
Hypothetically, what decision would you take about where to invest your money if it was a choice between investing in a company scoring 2/10 for its green credentials and returning 25% in one year vs a company scoring 9/10 but only returning you 2% over the same period?
Investing ethically can mean different things to different people, for example, an initial investigation into the underlying companies you are considering investing with. Screening out specific companies that you believe may not fall within your ethical framework.
Actively engaging in shareholder meetings and trying to sway the governance and decisions of a company. Seeking out investments in companies that have a better ESG rating. Looking to invest in companies that specifically target the causes that are important to you, and finally, Impact Investing, which is investing to achieve positive social and environmental impacts.
Generally, ESG or Ethical investing encompasses the following three areas.
- E - Environment, for example, fossil fuels, deforestation, and clean oceans.
- S – Social, this would relate to the organisation's social impact, including issues like inclusivity and treating employees fairly.
- G – Governance, think about leaders in large organisations and the impact their decisions can have, for example, the Volkswagen emissions test scandal and Facebook's misuse of personal information.
Depending on how much time you are willing to commit to researching your options and how confident you are with your investment capabilities, this is a topic you could delve into yourself. However, getting the right advice upfront is essential to achieving a better long-term outcome and peace of mind.
There are many great resources available to help get you started; check out https://www.ethosesg.com/
Ethos is a company that rates various investments across several ESG categories; you could focus on the environmental aspect. However, I suspect that once you begin to dig a little deeper, you will likely consider other elements of ESG inventing that will also resonate with your values.
And
https://responsibleinvestment.org/ Responsible Investment Association Australia
"RIAA is dedicated to ensuring capital is aligned with achieving a healthy society, environment and economy".
If you were expecting a simple answer to your question, I might have left you with more questions than answers. Nonetheless, I hope my answer will help to get you started.
I wish you the best of luck with your ethical investing journey.
Regards Daniel
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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