8 things we learnt from Good Money Week at The Big Exchange
by Liz Rees, Impact Analyst, The Big Exchange
Good Money Week is a campaign run by the UK Sustainable Investment and Finance Association to help grow and raise awareness of sustainable, responsible, and ethical finance.
Its annual event took place last week (4th-9th October) and we wanted to tell you 8 things we took away from a week of talks that aimed to raise awareness of financial products which aim to contribute to a better future for people, planet, health, and wealth.
- Green shoots are growing in finance…
Money invested in UK green and ethical funds in 2021 has shown significant growth according to the EIRIS Foundation. Assets under management, which tells you the size of the market, reached £61.12bn, almost double the total of £33.5bn in 20201. New fund launches and platform offerings (like ours!) have given people more access and choice.
2. But more needs to be done to cut out the weeds
The FCA (Financial Conduct Authority) which regulates UK financial services, has set out rules on the design and disclosure of ESG and Sustainable Investment funds to ensure any claims are clear and not misleading. Sustainable Investment labels will group together funds with similar objectives to make comparison easier for all investors.
3. It can be easy to get lost in 50 shades of green
Social aspects can be overlooked and are often given less attention. It can be harder to record data to measure positive or negative outcomes. For example, China may be a leader in electric vehicle production and solar power output but, from a social point of view may have some shortcomings. There is a fine balance to strike for investment professionals and no one can be perfect. However, there needs to be clear communication and transparency of decision making to help investors like you make the decision for yourself.
4. It’s difficult to see the wood for the trees
Greater transparency could help investors to better see where their money is invested, what it is doing, and whether it aligns with their values. There is a lot of data presented but there are simple things of which many people are not even aware. Did you know asset managers have an obligation to engage and vote on the shares of companies they own on behalf of their investors (you!)?
5. So, providers need to get the point across to you better.
Terminology can be confusing. The letters ESG (Environmental, Social & Governance) are often used as an umbrella term for anything “good”. Speakers at Good Money Week considered ESG labels as potentially misleading for investors. The term Sustainability was preferred for its simplicity — focusing on avoiding harm and doing good. It encompasses negative screens, choosing companies that provide sustainable goods and services, engagement to encourage better practice, and positive impact so fund managers can set much clearer expectations for investors.
6. There’s a lot of washing going on and it isn’t making things cleaner.
Greenwashing (when things claim to be more environmentally sound than they really are) can divert investment away from genuine sustainable finance into finance that just claims to be. Data alone is not the answer. With different data providers competing and companies trying to convince investors, the industry could fall into the trap of muddying the waters that we are trying to clarify. Clear reason, data and evidence of actual outcomes or changes need to be provided to back up claims. All of these things we look at when rating funds through The Big Exchange impact assessment.
7. All eyes are on COP 26 and COP 15 for meaningful action.
Extensive media coverage of the COP 26 climate conference in November will raise awareness of the critical threats to the planet. Governments will review the targets agreed in Paris in 2015, with experts warning that carbon emissions must be reduced now if we are to reach net zero by 2050. Many investment managers and investors alike are hoping to see widespread country commitments to a meaningful carbon price globally.
Good Money Week did not overlook the COP 15 UN Biodiversity Conference (11–15 October) where governments will agree a new set of goals for nature. The ecosystem services that support our lifestyles are being used in an unsustainable manner and there are investment opportunities in solutions across a wide range of industries, from clean water to healthy foods.
8. And finally, doing good shouldn’t mean you have to sacrifice returns.
Data and communications to inform retail investors are improving with more funds reporting in detail on impact outcomes Campaigns such as Make My Money Matter are also helping to show people how their money can have a positive impact.
How The Big Exchange is putting things into practice
There is so much choice out there now that it can be confusing to find what you want and where to find it. We use our impact methodology to rate funds for the level of positive impact they are having and award them gold, silver, or bronze medals. Those that don’t make the grade don’t qualify for listing with us.
We show you exactly what our funds are investing in and ask them to justify their holdings. We also give a score for the positive influence they have on investee companies and on the quality of their impact reporting (or how they justify their decisions). Most companies are likely to have some degree of negative as well as positive impact, so we also highlight any controversies associated with a fund. Our aim is to provide you with support, access, and choice to investments in the way you want.
And if you want to hear about us from Good Money themselves, they’ve carried out a review of The Big Exchange which you can read here.
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