Responsible investment funds set a new monthly record for sales in March 2021 as ESG investing grows in popularity.
One area of responsible investing with particularly strong growth is ESG. This latest insight looks at ESG investing, what it is and how it impacts workplace pensions.
Employers and advisers reviewing the default fund options for their workplace pensions over the past year may have noticed ESG options being added to their choices, with many providers for the first time.
But what does ESG actually mean?
For many workplace pension members, the value of their investments is no longer solely about what money it can make them, many also care about the positive impact their money can have in the world. This is where ESG investing can come into play. Environmental, social and governance (ESG) investing is on the rise.
By taking an ESG approach to investing, a fund/investor takes ESG criteria into account when they are considering investing in an asset within a fund. If a fund manager was looking at investing in a firm, they would look at its environmental impact, social factors such as community engagement and employee relations, and they would look at the company’s governance (ie the way the business is run, such as quality of management and the diversity of the board.)
Drilling down further, some responsible investment funds are focused on specific sustainable outcomes. The way pure ESG funds differ is that unlike wider responsible investment funds who focus on excluding sin stocks like tobacco or gambling, ESG goes a step further by focusing on the good as well as the bad.
Rather than simply removing all sin stocks, an ESG approach instead looks to include assets that score highly on environmental, social and governance factors. Therefore, investors instead of just knowing their money is not invested in anything bad, can also be reassured their money is being put into firms that have actively been identified as doing good.
If you would like helping starting your pension or need retirement advice please mail me at darragh@helpmypension.ie or call
086-8929232.
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