Fifty shades of green: the world of sustainable investment


“Socially responsible investing has been a real success story”

If investing in a sustainable way was once the philanthropic preserve of the super wealthy, it sure isn’t now. Ordinary people weighing up where to put their personal life savings can choose to do so in a way that will have a positive impact on the world they live in and will eventually bequeath to future generations. Where once they might have been put off by the higher cost and risk associated with environmentally-ethical investments, they can now be free of such considerations when going ‘green’, making it a much easier decision.

Socially responsible investing has been a real success story in recent years, with ethical funds assets skyrocketing from around $50 billion in 2005 to more than $220 billion in 2016, according to Bloomberg figures. Millennial investors are the most concerned about the social and environmental impact of their investments and the increasing influence of these demographics is driving more corporate focus on sustainability.

There can, however, be significant barriers which prevent many investors from arriving at this point: inertia, the hectic pace of modern life, even cynicism about the good that investing money in a sustainable company will actually do, or whether its sustainable credentials bear scrutiny. Green investing can be a decidedly grey area, with certain countries keen to clean up their reputations as sustainability soars up the agenda. In 2017, China was the largest emitter of greenhouse gas and the largest investor in renewable energy – nearly half of the world’s new renewable energy investment. Saudi Arabia is reportedly starting up $7 billion of renewable energy projects this year, with solar plants leading the way.

My proposal would be for a sustainable investment project based here at UEA. The University has a very strong behavioural economics department which has access to a wealth of data. And, as students are going to be the generation which will have the most impact on the sustainability over the next 10 or 20 years, such an initiative would present the perfect opportunity to find out what drives and would change their behaviour.

Younger investors are more conscious of sustainability than previous generations. They are used to having to research things online and make comparisons before they spend their money. This is also a generation that has grown up with climate change. But for most of our clients, how they decide whether or not to invest in sustainable investments is similar to how people decide whether to buy sustainable products from the supermarket or just adopt more sustainable behaviour in general, i.e. by considering convenience and cost.

One of the reasons many of us don’t move towards more sustainable investing is we think it will involve hours of research into the available options. What we need to do is make sure that when people come to make investment decisions, the information they need is available up front. This means we have to promote where that information can be obtained and then present it in a way that takes all the hard work away from the investor and makes it easy to understand the benefits, using social media, apps, websites and events, whatever it takes.

As financial advisors, we also need to inject this attitude shift into our client relationships. If they are investing for their children and the future, it is about asking them, ‘What do you want the future to look like?’ and reassuring them there is a tangible benefit and that they can play their part.

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1 October 2019

Fifty shades of green: the world of sustainable investment

Investment Analyst Radostina Dencheva contributed an article on the future of socially responsible investments to the recently launched publication, 'Visions of a Sustainable Future.' (2019). This collection of thought pieces form a multidisciplinary perspective on the key challenges and transformations facing us all in ensuring a sustainable future.

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