How can I tell if my investments are actually having a positive impact?
By Mike Narouei, Content Producer at Boring Money
1 Jan, 2020
How do you really know if your money is making a difference? Unless you’re a private detective looking into each individual company you’re invested in, it can be tricky to find out on your own, and some investment providers and financial advisers make it easier than others...
First way to check your impact: calculators
At the top end of the easy scale you’ve got companies like EQ Investors, Montanaro and WHEB Group, who provide Impact Calculators that work out exactly how much good you’ve done with your investments.
If I put £10,000 into the EQ Investors impact calculator, I’m told I’ve generated 1.9 MWh of renewable energy, avoided 2.3 tonnes of CO2 emissions, made 11 medical interventions and so on.
The same amount into WHEB’s impact calculator and I’m told I’ve generated enough renewable energy to power a household for a year, I’ve distributed enough clean tap water for 190 people, and I’ve provided preventative care for 1 person.
Montanaro's impact calculator even maps these metrics to the UN's 17 Sustainable Development Goals (SDGs), subdivided into categories including 'wellbeing' and 'innovative technology'.
So, with these calculators, you can clearly see how much of a difference your money is making… provided it’s invested in each company's corresponding funds. But what if you invest with someone else?
Second way to check your impact: fund reports
If calculators are top of the pops, the next rung down is a fund report. These are fairly common among larger investment providers, and although they don’t calculate exactly how much good you’ve done with your £10,000 (or your £100, or your £100,000), they do tell you what a fund has done as a whole. Plus they’re able to weave a more substantial story. Take Aberdeen Standard Investments’ Global Equity Income Fund as a good example:
If your provider produces reports like this, you should be able to find them on their website. Or you could just send them an email and ask for one.
If whoever manages your investments isn’t providing you with any information on their sustainable impact, ask them why. Their silence doesn’t mean something dodgy’s going on – they may just have a hard time calculating it – but it’s both important and interesting to know.
Third way to check your impact: ask a financial advisor
Advisors have a responsibility to act in your best interests, which is beginning to extend to investing in line with your values as well as investing to grow your savings.
The European Securities and Markets Authority (ESMA) guidelines on suitability requirements, published in May 2019, state that it is “good practice for firms to consider non-financial elements when gathering information on the client’s investment objectives and collect information on the client’s preferences on environmental, social and governance factors”.
Award-winning IFA Darren Thomas, Managing Director of Thomas and Thomas Independent Wealth Management, shared his approach to making sure portfolios are sustainable:
- “We do a negative screen first of all, so we say let’s just check that nothing nasty has crept in here. And really what we’re doing is checking the policies of the fund managers we use. Is there something they’ve dropped from their policies?"
- “A few years ago we noticed that the human rights bit had dropped off a couple of fund managers’ policies. When we contacted them we got quite wooly answers, saying there was quite a grey area. So we pulled those two funds straight out of our portfolios."
- “Our clients love this. Because we’re living in times when politicians no longer really appear to do anything, so it’s really about the power of your wallet. Can your money do something more constructive? But you need a conduit, you need a gatekeeper. And that’s our responsibility.”
If you’re on the lookout for an advisor, the website Unbiased.com is a great place to start. Using their search tool (https://v2.unbiased.co.uk/enquiry) you can specify that you want someone who is clued up with ethical investing and socially responsible investing.
Final way to check your impact: embrace your inner spy
If you can’t afford an advisor, you’ll have to do the legwork yourself. It’s time-consuming and you probably won’t get a precise answer, but you can at least build your own idea of whether a company is generally good or bad.
Darren Thomas shares some tips…
- “Look at the fund houses themselves and ask for their ethical investing policy. And they will share it, they will have it online. And if they don’t publish a policy, don’t bother with them. Because you need to know as an ethical investor how a provider is behaving with a particular fund.”
To go into more depth, you can then look up the individual companies included in your investment funds. Your investment provider will be able to give you a list of these if you ask for them, but you may already have it in an annual statement or report.
- “I would really encourage you to look at things a little bit cynically,” continues Darren. “Don’t just look at the glossy website. If you look at some of the oil companies their websites look so green – portrayed as caring, clean, green. And they’re not.”