20 pledges for 2020: Greening up your investments just takes a little research

Fund managers are responding to growing demand for ethical investments but have a care. Experts say some have indulged in greenwashing

Green minded investors can avoid companies that do this with the help of a little homework (PA)

Amid all the doom and gloom, here’s something positive: Hargreaves Lansdown, the investment firm, found that two thirds of people who watched the BBC’s Blue Planet have changed the way they live because of the environmental programme when it conducted a survey earlier this year.

David Attenborough’s documentary focused on the impact humans are having on the planet – drawing particular attention to climate change and plastic waste.

However, despite the programme’s welcome impact, and the fact that ethical funds have been around for a while, there was a sting in the tail.

Emma Wall, director of research, explains: “Despite these changes made to their everyday lives, our survey found that most people were unaware that they can invest in a way that benefits the environment and society.

“It is disappointing to learn that people who want to make an even greater positive impact, through their investments, were not aware that they could do so. It is our job as an investment industry to shout louder about the benefits of ESG investing, and to educate and enable people to invest in this way.”

Indeed so. But making people aware that there are funds that have the betterment of the planet as part of their investment objectives is just the first step.

They also need to be encouraged to think about what they’re looking for and then to research the market based on that.

“We’ve definitely seen more fund management groups considering the ethical implications of their investments, but different groups take different approaches,” explains Laura Suter, personal finance analyst at AJ Bell.

“Some think it’s better to be invested in the so-called ‘dirty’ companies and to use the power of their shareholder votes to push for change, while others will avoid them altogether. Investors need to work out which approach best fits with their views and beliefs and pick accordingly.”

Suter also warns about funds that just attempt to capture the interest in ethical investing by “badging funds up as ‘ethical’ when they really aren’t.”

The onus is very much on investors to dig into what fund managers are doing to incorporate ethical factors into their portfolio selection and to judge whether they’re just paying lip service to the idea in a cynical attempt to grub up business.

Fortunately investment platforms make this research a lot easier than it once was. You should also be able to find information on asset managers’ own websites.

It isn’t always easy to compare like with like. Ethical funds span a very broad spectrum. Ditto looking at and comparing performance, although you should always be wary of putting too much store in past performance .

However, Coad describes the Investment Association revealing plans for new ESG and ethical sectors as part of its fund classifications as “good news”.

This, she says, should “make it easier to pick funds that align with your morals and interests”.

That is indeed a positive development. Over the coming weeks, as part of the Independent’s 20 Pledges for 2020 series I’ve pledged to help people navigate the green investment maze. There’s no one way through it. But it is a way you can achieve positive change.