A Question of Ethics on ESG Ethical Investing

ESG – investing in stock markets funds for Environmentally friendly, Socially responsible and good Corporate governance.

The commitment by the UK and many other countries in the Paris Climate Agreement to carbon neutrality by 2050 has been developing at pace.  More so now, will Europe’s reliance on Russian gas and oil and globally the impact this has had across the globe will no doubt speed up the move towards being carbon neutral.

Already in the UK, many larger businesses are required to document their plan for reduced and then neutral CO2e emissions.  In addition, the fund managers of our pensions and investments are required to complete due diligence on those companies that they buy shares in to ensure that pressure is applied on all sides for businesses to become carbon neutral.

This has filtered down to financial advisers where we are required to ask you about your views, be they strong views or no views on ‘greener’ investing.

We have an ESG questionnaire that covers many areas that have a positive and negative impact on the environment, on social responsible areas and human welfare, how companies are run, energy and fossil fuels, banking and financial services and so on.

Ethics

Ethics are the moral principles that govern a person's behaviour or the conduct of their activities.

Many of us will no doubt automatically wish to exclude human rights abuses, oppressive regimes or animal testing but we also see a lot of conflict when clients complete our ESG questionnaire.  Some people exclude things that have a positive impact and others include things and then contradict this with other answers.  For example, please look at a few of the following more recent conflicting responses and our questions to clients:

• Excluding alcohol production investment - Are you ‘teetotal’?  So, you don’t agree with the increase in ethanol content in your unleaded petrol for greener travel?
• Air transport investment – Are you ever going to get on an aeroplane again?
• Electronics products – We assume you have no electronic items or plan to have no electronic items and will return to live in the stone ages.
• Internal Combustion Engine – why have you got a sports car and a 4X4 on your drive?
• No to IT software – do want an abacus or would you prefer to keep your smartphone, tablet, and smart TV?
• Animal products – are you vegan?
• Banking – do you not want or need money, and do you want to keep your money safe?
• Armaments – this is a difficult one.  Arms that are designed to injure and kill another human being are not good.  That said, what about defence arms?  How do you feel about the Ukraine position?  Would you prefer let innocent people get killed, hurt or displaces?  Ho do you feel about UK rams being used to defend Ukraine?  What would you do if an enemy invaded the UK to supress our nation, would you comply?  Would you stand aside and watch your loved ones be attacked, imprisoned, shot or raped?

We know some of the above are extreme examples and we all want to do our best.  All that we ask is you think carefully when completing our ESG questionnaire as ethics, whilst supposed to be ‘green’ on nature are actually a grey area s we all have different behaviours and experiences that have shaped our views.

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