Here's how to ensure your money not only goes further, but is also put to good use
What’s your relationship to investment? Most of us try to avoid the word altogether because we're probably not 100 per cent sure how to get started (or even what it is, really). Talking about investing our money can feel strange and nebulous, especially if you’re not even sure you have money to invest. But even if you decide to invest a very small amount to begin with, it will grow over time, making the output worth it. So it's useful to get clued up about going green with your coin and get your money moving with a little more purpose to it.
Let's start with the basics: what does sustainable investment actually mean? Simply put, it means that there are criteria added to the company you invest with, outside of financial considerations. This could mean not investing in companies that produce or use fossil fuels, for example. These are known as ESG (Environmental, Social, Governance) funds, meaning that ESG factors are part of the criteria of the funds.
Here, we’ll be discussing sustainably-minded investment funds that aim to deliver high and competitive risk-adjusted returns by speaking with investment expert Alexander Jansson, portfolio manager at Save Earth Fund, a sustainable fund.
Jansson explains that it’s not about how much you put in at the beginning, it’s about just getting started. “Don’t invest everything at one point: spread it over many months or years (monthly savings is a good way to do it),” he says.
“The market goes up more than down in the long-term, so in the long-term it is good to invest a lot, but drawdowns can take a long time to recover. If you invest long-term do not invest money you need short term. Start with a broad approach and narrow it down as you learn.”
Luckily, learning about investment is becoming easier all the time, and this includes getting more information on where your money is going. More people than ever are concerned with how their money is used, and for that reason there’s a host of new ethical and sustainable investment options.
Still not sure where to start? Jansson offers his five top tips to consider for sustainable investment:
- Always focus on investing and then add sustainability. Don’t get carried away by story-telling about sustainability (e.g. greenwashing). The same rules apply to all investing, including sustainable investing.
- Define why you want to invest sustainably and what your expectations are. Are you doing it only based on the financial outcome? Based only on the sustainable outcome? Based on a defined combination of the financial and sustainable outcome? This will help you decide when to invest and when to move away from a particular fund.
- What is sustainability for you, and what do you want it to be? At Save Earth Fund we have defined sustainability as investing in clean tech, renewable energy, and water. You may decide that there are other elements that are more important to you; find the funds that address these particular concerns that really appeal to what you are passionate about.
- Play the long game. Don't think short-term, instead adopt a more long-term approach when it comes to investments and in particular when it comes to mega-trends like sustainability that will play out over decades. Yes, this requires patience, but it could be worth it.
- Diversify regarding both sustainable investments and sustainable ratings. There is a broad range of sustainability ratings for funds – if you want to use them, use more than one to get a sense (not an answer) of how sustainable the fund is, as there are many definitions and ways to define a sustainable fund. Don’t be afraid to ask questions; it’s your money, after all.