January 8, 2019 / Engagement

ESG investing not black and white

By Jassmyn Goh, Expert Investor

Fund selectors need to help clients understand the implications of sustainable investing as harm can still be caused

ESG investing not black and white

As investors become more aware of sustainable investing they need to understand implications, according to a panel.

Speaking on a panel at Expert Investor’s ESG Congress late last year, Affinity Private Wealth director for investments, Russell Waite said while people were starting to focus more on sustainability issues, it was important to understand ESG investing implications.

“I think one thing we have noticed is that some clients will come in very opinionated about, ‘I don’t want to invest in oil and gas.  I very much want to invest in electric vehicles and batteries’,” Waite said.

“Then we will say, ‘Well, that’s fine and we can clearly cater for that investment, but let’s just scratch the surface so you understand some of the implications’.”

Waite noted that electric vehicle batteries needed an electrode, cathode, which needed the chemical element cobalt. However, cobalt is mined in the Democratic Republic of Congo where child labour was prominent.

“So, when we go through those conversations, it just does allow those investors to open their mind to the fact that sustainable investing is not black and white, it’s very complicated but, what we’re finding is, there’s a real appetite to try and impact change,” he said.

Millennials not the whole ESG game

Also speaking on the panel, Mainstreet partners director, Rodolfo Fracassi said while millennials were the most aware of sustainable and impact investments they did not have the funds yet to fully focus on them and were not the whole game.

“Most investors are conservative and as millennials don’t have so much money yet they’re just part of the family and they need to convince all the others in the family. So, we decided to do more traditional products for the private banks especially,” he said.

“So we would start with a very broad diversified global balance, flexible multi-asset portfolios with ESG [environmental, social and governance], and highly sustainable. Then we start inserting a little bit of the best impact investment products to provide a mix.  Starting slowly and then getting there little by little.”

Fracassi said he expected that everybody would have awareness about sustainable investing within 20 years.

– This article first appeared on ESG Clarity‘s sister site Expert Investor.