The International Panel on climate change report does not pull any punches when it comes to the crisis the world is facing. We see bigger, irreversible changes every year and there is a stark realisation that something must be done to protect our environment. Most people have a willingness to act, but while the changes need to happen on a macro level, it can leave many feeling helpless. The climate crisis has been on our radars for decades now, and it is clear that fear and stress are not a catalyst for action. In order to achieve change, there is a need for constructive initiatives which can show people the opportunities available to them which can make a positive impact. In the world of financial planning, ethical, social and governance (ESG) investing, is one such opportunity.
ESG investing is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents. It has been reported that 85% of hedge fund managers say that institutional investors are the biggest drivers of demand for ESG-oriented funds, and the percentage of institutional investors that implement ESG approaches rose by 18% from 2019 to 2021. Most life assurance companies in Ireland are now offering purely ESG orientated investment funds which my clients invest in through their pensions and savings.
But how has the ESG movement performed when it comes to returns on investment?
Amundi, Europe’s largest fund manager, offer two pure ESG funds which are available through the Irish Life platform. The better performing of the two is the Global Ecology Fund which was established in 1990 and has a strong track record of good performance. This fund is primarily invested in Europe as well as one third of its assets held in North America. Over the last ten years the Global Ecology Fund has averaged returns of 11.63% per annum.
Aviva also offer specific ESG funds through their investment platform. Their flagship ESG fund is the Aviva Ethical Stewardship fund. This was launched in 1989 and is a far smaller fund than Amundi’s, however, the performance again has been exceptional. Over the last ten years the Aviva ethical stewardship fund has returned an average of 17.05% per annum. To date this year, it is up north of 20% and with money moving towards ESG companies both funds should have continued success.
It should be noted that these investment funds are both highly volatile and are at the higher end of the risk rating scale. However, for an investor with an appetite for risk and a long term outlook, the performance of these funds would fit the bill.
Whether you are driven by your values or value, you don’t have to sacrifice one for the other. A study by Morgan Stanley comparing the performance of sustainable funds and traditional funds from 2004 to 2018 found returns were comparable. In fact, in this particularly volatile period sustainable funds were more stable.
How can I incorporate Ethical Investing into my own savings/pension?
Ethical investing has never been more accessible with most life assurance companies offering specific ESG funds. These can be accessed through regular savings policies which will accept monthly contributions of a minimum of €200. It is also possible to invest lump sums into these policies and get exposure to ESG in this fashion. Many are using ESG funds to invest a portion of their pensions in conjunction with a financial adviser. If you need any assistance with this, I would be happy to help if you get in contact by email at [email protected].
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My initial meeting with Darach was as a Lecturer in LIT who will have less than 40 years- service at retirement. After a completing a review, I had a clear understanding of how my pension worked and how best to optimize it going forward.
I have found Darach to be very friendly, knowledgeable, no way pushy and quite transparent in his recommendations. I would strongly urge you to have that initial consultation. My experience of Honan Financial Services has been a very positive one both personally and financially.
I was looking for alternatives to saving in the bank as there was little to no growth to be had in their savings accounts. Honan FS made it very easy to invest in a multi asset fund which meets my long-term goals. I’d recommend Honan FS to anyone looking for advice on any aspect of their financial planning.
When taking out our mortgage we were offered mortgage protection by the bank. After a review with Darach we found a policy which was more comprehensive and better value for money. We were also able to optimize our savings through a regular savers policy which has achieved far better returns than what was on offer with the bank.
At the start of 2021 we both decided to do a health check on our financial status. We both had occupational pensions schemes left from previous employers and we reached out to Darach for assistance and advice on transfer options. Darach was excellent in helping us map out our future financial needs , determining our outlook to risk , providing sound financial advice and discussing best performing options to suit us
Darach dealt on our behalf with the previous pension providers and their associated agencies and the whole process we felt was very professional and a seamless transaction to us. Because of interest rate returns on bank deposits /post office being virtually zero and essentially loosing money on deposit we also seeked advice on alternative investment products for the mid to long term.
We were looking for products that gave a good rate of return and that we could lock away for 10 years plus to help with education funding. Both requirements were met very professionally by Darach and his team. We are both very happy we reached out to Darach . The only regret was we didn’t do this a few years earlier but better late than never.”
Darach has looked after my pension for a number of years and once he setup Honan Financial Services, it was an easy decision to move my pension / financial planning with him. Darach continuously demonstrates a thorough and rigorous approach to customer service and his clients individual’s needs. He is thoroughly professional, exceptionally friendly and the best in the west in my opinion. I would highly recommend him to all.