{"id":12770,"date":"2020-08-28T09:00:11","date_gmt":"2020-08-28T07:00:11","guid":{"rendered":"https:\/\/my-life.lu\/?p=12770"},"modified":"2020-08-28T10:25:36","modified_gmt":"2020-08-28T08:25:36","slug":"invest-wisely-and-help-save-the-planet-30071","status":"publish","type":"post","link":"https:\/\/my-life.lu\/en\/invest-wisely-and-help-save-the-planet-30071\/","title":{"rendered":"Invest wisely and help save the planet"},"content":{"rendered":"
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There\u2019s no escaping environmental issues in today\u2019s world. Yet we\u2019ve found that various forms of cognitive bias stop us changing our habits and becoming more responsible consumers, in terms of both consumption and investment. This needs to change. We need to realise that every wisely invested euro \u2013 whether on the financial markets or in your household budget \u2013 helps save the planet.<\/p>\n

In a previous article (What stops consumers from saving the planet?<\/strong><\/span><\/a>), we learnt about how cognitive dissonance stops us reconsidering our own consumption habits for the benefit of a global cause such as climate change. The same can be said of our investments on the financial markets. So, how do we change this?<\/p>\n

When reputation dictates performance<\/h2>\n

At the supermarket, how do you make \u201cgreen\u201d choices? You choose products that are labelled organic, locally sourced or Fairtrade. The same should apply to investing. To make \u201cgreen\u201d investments, we need to go beyond the usual financial considerations to apply traceability principles and favour investments in products that score highly on environmental, social and governance criteria (ESG). myLIFE regularly highlights these topics in its \u201cAsk the expert\u201d articles<\/strong><\/span><\/a>.<\/p>\n

The principle is fairly straightforward. But maybe you remain unconvinced that a small group of people can have a global impact, not least in finance. You\u2019re wrong.<\/p>\n

The World Economic Forum recently published a compelling article on this issue<\/strong><\/span><\/a>, which contained the following extract: \u201cA recent research report in collaboration with CDP (formerly the Carbon Disclosure Project) identified the world\u2019s 250 largest publicly-traded emitters \u2013 a group of businesses that, together with their value chains, account for approximately one third of global annual greenhouse gas emissions.<\/p>\n

The fact that just 250 companies have the ability to influence almost 30% of all our emissions highlights what a difference a small group can make on a global scale.<\/p><\/blockquote>\n

This fact that just 250 companies have the ability to influence almost 30% of our entire annual global emissions is actually quite shocking. But it also highlights what a difference a small group can make.\u201d Following the same logic, the investor community can play a central role by favouring ESG criteria when deciding where to invest their cash. Maybe you don\u2019t find this type of investment credible or appealing, but it\u2019s time to get over your preconceptions in this respect too.<\/p>\n

In Luxembourg, private and institutional investors looking to focus on ESG criteria have a particularly wide range of investments to choose from. In launching the Luxembourg\u00a0Green\u00a0Exchange in 2016, the Luxembourg\u00a0Stock\u00a0Exchange became a pioneer, creating the world\u2019s largest stock exchange platform for green finance. The institution publishes regular reports on green investments and ESG criteria, which anyone looking to follow a green strategy can use to inform their investment decisions.<\/p>\n

Reputation and social responsibility pay dividends. Invest in ESG-focused portfolios and earn higher returns<\/p><\/blockquote>\n

Opting to invest even just a few euro in green solutions gives you the power to help in the fight to save the planet. And you\u2019ll be better positioned to see your money grow in the long term, since ESG criteria are now a great indicator of the viability of a company and its business model. Reputation and social responsibility pay dividends: they\u2019ve come to be a new social norm that boosts the attractiveness, sustainability and profitability of \u201cgreen\u201d companies.<\/p>\n

In a 2019 report entitled \u201cThe Alpha and Beta of ESG investing<\/strong><\/span><\/a>\u201d, experts from Amundi analysed the stock market performance of 1,700 companies on MSCI indices and cross-referenced the companies\u2019 scores with their ESG performance. The results are telling, in both Europe and the USA. According to this Amundi study, investing in companies with higher ESG scores brings greater profit. But even more interesting is the fact that companies with low ESG scores tend to underperform and generate lower long-term returns for their shareholders. We are of course duty-bound to remind you that this study is based on past data and that, as usual, these data cannot predict future performance.<\/p>\n

But it\u2019s plain to see that with this type of investment you can earn money while making a tangible contribution to saving the planet.<\/p>\n

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ESG criteria for investments are not yet uniform and vary substantially according to the sources considered.<\/p><\/blockquote>\n

Which criteria should you use?<\/h2>\n

ESG criteria for investments are not yet entirely uniform and vary substantially according to the sources considered. With that in mind, we cannot overstate how important it is to speak to an expert for help with your ESG investment decisions. To simplify matters, here\u2019s a list of some of the broad principles \u2013 which are generally complementary and used with one another \u2013 underlying this type of investment:<\/p>\n