Considering tobacco and fossil fuel companies, many funds have shifted away from investing in these, but there are still funds out there that continue to invest in these areas.
Yan Swiderski, trustee of the Global Returns Project, says for decades most investors have focused entirely on financial returns without considering their impact on the planet, arguing that funds that continue to invest in tobacco and fossil fuels fall within this category.
“But this old-fashioned and degenerative approach to the earth ignores the economic effects of the climate crisis,” he says.
However, Patel argues that these funds continuing to invest in these companies will lose investors.
He says: “Investors will vote with their feet and disinvest from, or not invest at all in, companies that contribute to shortening people's lives and companies that participate in fossil fuel production and supply, which threatens the existence of people and the planet.”
Conversations about ESG and sustainability are being discussed in all parts of the world, more recently at Cop26, with many believing the shift towards this is inevitable in order to sustain the earth.
James Alexander, chief executive of the UK Sustainable Investment and Finance Association, agrees but says it varies depending on the definition of sustainable investing.
He says: “If we take it in the broadest sense of meaning, all investment decisions explicitly take into account and integrate climate change and wider sustainability issues, then we believe in time this will be an inevitability.
“This is in part due to client demand and clients/savers’ rising interest in their investment mandates incorporating ESG issues. We are increasingly seeing savers wanting their values to be expressed in their investments and a growing awareness of the power their investments and pensions can have as a force for good in driving progress to a greener, more sustainable future.”
Alexander argues that the rising demand from clients and savers is putting more pressure on financial services to gain a competitive edge and offer ESG products.
“The sector has come some way in developing and offering to pension funds, and other clients, climate-conscious financial products and funds,” he says.
Is ESG the inevitable future?
Across the industry it is no question that people are showing greater interest and awareness and that there is increased support for a responsible investment approach.
Research has more often than not found there has been increasing demand for low-carbon funds, funds investing towards a cleaner economy and more.
However, Ditchfield says this is not enough as there is a great deal that needs to be done around consumer education here as far too many people do not engage with pensions actively.
