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Is it time we ‘got woke’ to ethical investing?

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Is it time we ‘got woke’ to ethical investing? 1

By Andrew Gilmore, chartered financial planner at Active Chartered Financial Planners

In the media, we see more and more about society becoming more ‘woke.’ There is more emphasis on making ethical choices, whether this is in the products we buy, the holiday destinations we visit or the celebrities we follow on Twitter. The same can be said for where we invest our cash. Can we make our money work for us while maintaining a clean conscience?

I have observed a growing number of potential investors who are concerned with the moral decisions taken by world governments and organisations, as well as the question of environment and sustainability. In short, people are thinking more about how their money may be used when investing in funds.  The associated investment in the underlying companies, governments and activities they undertake, and whether their money may be used to benefit the environment, wellbeing, and sustainability.

In the UK, environmental activist group Extinction Rebellion has recently stepped back into the limelight following a brief, coronavirus-forced hiatus, so climate change is again high on the public agenda.  Although the protests and demonstrations can be a prickly subject, they certainly raise awareness and force us to consider what is happening and what we can do to prevent further ecological crises.

In addition to this, the financial advice sector overall will be changing to put the clients’ ethical views at the forefront. Clients will be asked for their thoughts and feelings, and these will then be taken into account when decisions are made about investments.

In the past year, our firm has seen an increase in enquiries about how to invest ethically. As this topic comes with its own brand of jargon and acronyms, including SRI, ESG, SDG and ‘Impact Investing,’ I wanted to take the time to clarify what these mean and how they impact the investor.

What is ethical investing and why are people choosing it?

Ethical investing seeks to provide both a financial return whilst having a positive social and environmental impact. This type of investment strategy would typically avoid firms which may be involved in stigmatised activities, including smoking, alcohol, gambling or the arms trade, as well as having a negative impact on the environment.

While some people believe that ethical investments ultimately produce lower returns, further research suggests that shares of ethically responsible companies can perform equally well over three to ten years and beyond, because their stock prices see less negative impact from industry fines and negative press.

This has made them a more attractive prospect, as investors can think with their hearts without it hitting them in the bank balance.

What new terminology do I have to be aware of?

  1. Ethical investing: Ethical investing itself focuses on screening for negative activities and avoiding placing capital in companies that invest in taboo or potentially harmful practices, which could include companies which use child labour or non-Fairtrade cotton. The practices of such firms have come under more intense scrutiny over the past few years, creating a choice in investment types becoming available.
  2. Environmental, Social and Governance (ESG): ESG investing focuses on companies demonstrating their own governance practices in relation to the environment, social responsibility. Unlike traditional ethical screening, this places a focus on positive screening, that is, what the company is actively doing to be ethical, rather than what negative practices they engage in to make them unethical.
  3. Socially Responsible Investing (SRI): SRI aims to provide positive social outcomes through its investments, making it a blend of traditional ethical investing and ESG but with a more measurable approach. It screens out potentially unethical stocks first and then concentrates on a company’s ESG approach, providing a more comprehensive approach to investing ethically.
  4. Impact investments: Impact investments are made in emerging and developed markets and focus on an outcome or impact that will be ethically positive. These companies harbour the intention to generate a beneficial social or environmental impact alongside a measurable financial return. In some instances, these companies may be screened out under other approaches, however could fall into this category if they are working towards becoming more sustainable.
  5. Sustainable Development Goals (SDG): SDGs are part of the United Nations (UN) blueprint set out to “achieve a better and more sustainable future for all.” There are 17 goals in total, including:

    Andrew Gilmore

    Andrew Gilmore

  • No poverty
  • Zero hunger
  • Good health and wellbeing
  • Gender equality
  • Clean water and sanitisation
  • Affordable and clean energy
  • Climate action

Does ethical investing really work?

Although it may seem like a fairly new phenomenon, ethical investment has been around for a while. Shareholder activity contributed to the defeat of apartheid in the 90s and led to more ethical practices by a well known supermarket in the mid-00s.

According to the Global Sustainable Investment Review 2018, at the beginning of 2018 global sustainable investment had reached $30.7 trillion in the five major worldwide markets; Europe, USA, Japan, Canada and Australia/New Zealand. This demonstrates a 34 per cent increase over two years.

One of the primary arguments against ethical investing has been the lack of suitable investment solutions and product development. This argument is countered, however, by an increase in investment providers promoting these product ranges more frequently. This, in turn, has improved availability and awareness in the last few years.

A further challenge, as previously mentioned, is regarding how the investment performs There is a persistent impression that investment returns must be sacrificed if you wish to focus on a social or ethical impact. This comes primarily from the preconception that unethical activities will yield greater profits. This could be, for example, because a ‘sweatshop’ will pay its workers significantly less than a Fairtrade counterpart. While this might be true in the short term, over the course of several years, these investments can prove just as lucrative.

Research in 2018 by the Global Impact Investing Network (GIIN) shows clients are ideally searching for a balance of achieving social responsibility whilst maintaining average market returns. They don’t want to throw their money away or find themselves short when they come to draw their investment, but they also want to make a difference.

GINN found that, from a financial performance perspective, the majority of clients that are choosing ethical investment products are either in line with or outperforming their expectations, with only nine per cent feeling the investments are underperforming relative to their expectations.

With this in mind, we could see more high net worth investors choosing to back companies with a strong ethical compass, rather than their less virtuous competitors. Will the ‘woke’ generation use their money to change the world? Only time will tell.

The value of your investment can go down as well as up and you may get back less than the amount invested

The information provided must not be considered as financial advice. 

We always recommend that you seek financial advice before making any financial decisions.

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Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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COVID-19 is changing people’s preferences when it comes to BTL investments

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COVID-19 is changing people’s preferences when it comes to BTL investments 2

By Jamie Johnson, CEO of FJP Investment

Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.

Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.

With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.

It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.

My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.

For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.

This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.

At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.

But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.

Liverpool life

Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.

With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.

Leeds living

Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.

And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.

With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.

Cardiff’s regeneration

And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.

Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.

BTL remains a sound investment opportunity

COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.

COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.

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