There are many reasons in favour of Sustainable Investing, but for many investors the topic is a fairly new one. And, as we all know, new and unknown things make people uncomfortable hence the prejudice and supposed reasons against sustainable investing. The Top 10 which I have come across so far I have listed below:
Nr. 10: The positive impact sustainable investing has on nature is small.
If you invest into sustainable, instead of «normal» stocks, you decrease your carbon footprint of your portfolio (and therefore yours’) by more than 10 tons per year (with an 100’000 investment amount, own calculations). This amount of carbon is generated e.g. by a passenger on an around the world flight or by a car driver driving a distance of 70’000 km. How many tons would you save?
Nr. 9: I am sustainable in my everyday life but I invest traditionally.
Sustainability in your everyday life is good and fosters awareness for the general cause. For example using public transportation and avoiding plane travel you can decrease your carbon footprint significantly. But you would have to go -to extremes regarding sustainable living in order to achieve carbon savings of ten tons as described in the previous example.
Nr. 8: I prefer to compensate my carbon footprint differently.
Compensating might be useful, but is not for free. In order to compensate for ten tons of carbon per year you would have to pay about 285 CHF (MyClimate.org). Assuming an investment of 100’000, this decreases your return yearly by 0.285%. Instead if you invest sustainably from the start, you save costs of 0.285% each year and also have a better carbon footprint.
Nr. 7: This is too expensive.
You will certainly find expensive sustainable investment funds which cost 2% or more per year. But as a more cost-efficient alternative you can also use sustainable ETFs (Exchange Traded Funds) and profit from yearly costs of below 0.4%. If you want to delegate investing to a sustainable wealth management company, this is possible for 1%.
Nr. 6: This is not transparent enough for me.
The sustainable investment market is certainly newer and maybe partly a little more complex than the traditional one. Just get yourself more informed about the topic to see it in better perspective. Good sources of information are: The Forum for Sustainable and Responsible Investment or on Wikipedia or, just ask a question within this blog!
Nr. 5: It is not possible with my bank.
In case you have a depot or can open one through which you can purchase securities on stock exchanges, you have everything you need to invest sustainably. In case your bank advisor is of no help to you, it might be, that he or she is just not knowledgeable enough on this topic or sustainable investments are just not part of his sales list. If it is really not possible with your bank, it may be time to change bank.
Nr. 4: The Sustainable Investment market is too small for me.
In 2016 about 161bn CHF have been invested in sustainable investment funds or mandates (Swiss Sustainable Finance). This is certainly smaller than the traditional investment market, but you certainly do not need to get claustrophobic.
Nr. 3: There is too little variety within the Sustainable Investments.
To some extent this is -true. Even though there has been a steady growth of alternatives, such as in the sustainable funds area – there is less choice than with traditional funds. So, you will probably – not find an equity fund, which only invests into Swiss companies with high dividend expectations. But, the question is, does it really need to be so specific? Perhaps a sustainable equity fund which invests into Swiss companies can do the job?
Nr. 2: There are only standardised investments, nothing which is customised to my needs.
That used to be the case – and is why we have started Responsible Returns. You want to invest without animal testing, fossil energy and genetic engineering and to have a focus on the environment and more specifically into climate friendly investments? This is just one example out of many, as to how a portfolio can be customised to your preferences. How does your customized portfolio look like?
Nr. 1: If one invests sustainably one is foregoing return.
The thought is: “Who would voluntary forgo return?”. The fact though is that sustainability is not standing in the way of return. You’ll see this for yourself if you compare available scientific papers on this topic (see link, bottom of the page) or, think about the following: If non-sustainable investments would perform better, there would be enough people without ethical concerns who would invest into the non-sustainable investments. The higher demand would lead to a price increase, which would then subsequently eliminate the expected future return advantage.
Have you had similar experiences with reasons against sustainable investing? What are your feelings on this topic? Please leave a comment and share your views.