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Sustainable investment can deliver solid returns over time
WITH the rise of conscious living, more people around the world are more mindful of what they leave behind. Much of the discussion has focused on moderating consumption and lifestyle such as driving less to cut down on carbon emissions, eating less meat for animal welfare and the climate, or even boycotting musicians whose actions are not aligned with such principles.
However, most people tend to overlook the area where we can potentially have the biggest impact on the world - our investments. Our savings give us a strong voice and unique opportunity to influence and deliver real impact in the world that we live in. For example, a research report has shown that for the period of a lifetime, it is 27 times more effective for sustainability efforts if a person invests his savings and pensions in sustainable investments, compared to switching to eating meat once per week or saving on an international flight once a year.
This shows that putting individuals' investments and savings to work offers a great opportunity to influence society, environment and climate.
As Singapore investors sharpen their acumen and become more adept at making responsible and rational investments, we believe that there is an opportunity for the everyday investor to take more ownership for where they put their money.
According to a global survey by Natixis Global Asset Management (Natixis), about three in four (or 73 per cent) of Singaporean investors think of investing in companies with positive social impact. The survey noted that 75 per cent of Singapore investors also consider investing in companies with good environmental records, higher than the global 72 per cent.
Around 79 per cent think that investing should reflect their personal values, but only 39 per cent say that index funds contain the companies that contain these. With tools available in the market today like SaxoInvestor, which is designed for the everyday investor, everyone can make a conscious effort to select funds or companies that match one's beliefs while ensuring returns at the same time.
Meanwhile, a survey last year found that one in two millennials in Singapore have not yet started saving for the future, showing the lack of knowledge around the enormous power they have to make a real difference with their funds yet are generally lacking in investment knowledge. Young people could be put off by the perception that it is very expensive to have a bank make investment decisions on their behalf. With new technology, it is now easier and cheaper to invest your savings in precisely the areas and agendas that you want. When we invest in companies through equities and bonds, we help the individual companies with capital for their daily operations and development, and we therefore contribute to promoting their vision and strategy. A share in a company that works with renewable energy is more than just an opportunity to achieve a return on your investments - it is an ownership of the entire company and can, for example, help combat climate change.
The same dynamics apply if we buy a mutual fund or exchange-traded fund (ETF) that invests in a number of different companies based on certain rules and principles. These can be thematic funds focusing on companies that promote women in leadership, education, clean drinking water or less plastic consumption.
NOT A ZERO SUM GAME
Notably, the survey found that majority of investors in Singapore (68 per cent) also think that they have to sacrifice some return potential so that their investments match their personal beliefs.
That need not be the case. Studies have shown that sustainable and responsible investments can deliver solid returns over time. Indeed, sustainable funds, for example, are not only philanthropic or impact-driven, they can be real drivers of profits.
The financial sector has a great responsibility in enabling everyone to seize the opportunities to influence and change the world using their savings and pensions. It is a key task for the financial sector to change the perception towards savings and investments by providing customers with better investment tools, more relevant information and services and, of course, lower prices.
Once these are in place, it does not have to be cumbersome and unnecessarily time-consuming for investors to calibrate their savings to match their own values to a greater extent - and not just the preselected investments that the bank has picked for you.
Investment decisions are some of the most important decisions that we make, and therefore, should not be limited only to a small group to access the best tools and abilities to seize the opportunities.
Today, brokerages are working to make investments more accessible, create more transparency and lower costs. The next step is to focus even more on providing relevant information and tools for the consumers so that everyone is best equipped to manage their investments and financial destiny.
- The writer is ceo and founder, Saxo Bank