3 tips for women who want to use their money to save the planet

If you’re new to the idea, ESG focuses on ethical, social, and governance factors. It takes a more in-depth look at the important factors contributing to the well-being and well-being of people and the planet.

But why is this important for women who invest?

It is predicted that women will likely hold over 60% of the UK’s wealth by 2025.

How we choose to use this money for our own good and that of society as a whole is in our hands.

And investing ethically is much easier than it looks. Here are 3 tips to get you started.

While this article can give you some helpful investment advice, it is not a personal recommendation. If you are not sure whether something is right for you, we suggest speaking to a financial advisor. With all investments, there is a risk that you will get back less than what you invested and past performance is not an indicator of future gains.

Tip # 1 Decide What “Ethics” Means to You

One of the most common conversations I have had with friends around ESG is how much large ‘non-green’ companies dominate ESG funds or rankings.

It is typical to see large pharmaceutical, tobacco and even mining companies at the top of the ESG list. Because it is usually the companies that do the most to offset the effects of their industries on the planet, by giving them higher ESG scores.

It goes without saying that industrialization has played a role in the climate crisis, so how does it make sense to invest in organizations that seem to be part of the problem?

It might sound a bit ‘chicken and egg’ in this scenario. It just depends on whether you are happy with these big companies that could be causing climate problems, but do your best to make up for it.

There are different ways to try to invest ethically. From impact investing, through investment in wind farms, or through exclusions, such as the selection of funds that filter and avoid certain criteria such as tobacco or pharma.

The choice of how you want to invest is up to you. You can choose from a range of options or find one that suits your investment strategy better than others.

There’s no right or wrong way to approach it, so find the balance that’s right for you.


Tip # 2 You don’t have to go it alone

When you begin your ethical investing journey, you can feel like a small pebble in an ocean of possibilities.

But you don’t have to spend time digging through company reports to find what’s right for you.

You might think of investing in a fund where the fund managers do the heavy lifting and spread the investments between different companies and different sectors. You should only invest if the fund’s objectives are aligned with yours and you understand the specific risks of a fund before investing.

But if you’d rather choose individual stocks rather than funds, don’t just rely on individual company commitments to corporate social responsibility or ethical governance. Investing in sole proprietorships, however, can be riskier. You could lose your entire investment if something goes wrong.

This might be the more difficult option as there is a lot of groundwork to cover. Make sure to check the company’s ESG credentials like their annual reports, company risk assessments, and even materiality maps.

Materiality maps categorize issues by industry based on two types of evidence: that investors are interested in the issue, and that the issue could impact businesses in the industry. These maps are a good starting point to gain insight into industry-specific priorities.

From there, you can decide if you feel comfortable investing in them.

When it comes to building your portfolio, you can choose what really matters to you. But keep in mind, whether you decide to invest in funds or individual stocks, always make sure to diversify your investments between sectors, geographies and markets to spread your risk.


Tip # 3 Invest for the long term

Investing is not a get-rich-quick scheme.

You’ll want to make sure you invest for at least five years so that you are prepared for the ups and downs of the market.

If you’re worried about putting your money aside for long periods of time, make sure you’ve built up your cash reserves first. This is called your emergency cash reserve – it’s a key part of building your financial resilience. We generally suggest having at least three to six months of essential expenses in an easily accessible account. And one to three years if you are retired or have no income.

Incorporating ESG into your long-term investment strategy isn’t just about looking at what a company is doing right now. But also what are their future ESG plans.

This is usually where “Best in Class” ratings (the ratings used to rank companies according to their ESG status) can give you an idea of ​​future factors for a company’s sustainability.

Take the example of two companies: Company A has clearly defined ESG in its annual report and unveils its long-term strategy for integrating ESG factors into their future.

Company B doesn’t have a clearly defined plan, so we don’t know what their ESG plans are, or if that’s on the agenda.

If you want both Company A and Company B in your portfolio, but want to be ESG-focused, you can adjust your portfolio to reflect the above.

Also, be sure to keep an eye on how companies are performing each year when it comes to meeting their ESG goals.


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