A Guide to Investing Responsibly

Responsible investment aims to generate good returns while contributing positively to our society and environment.

Parker Financial Advice Ethical is committed to being a responsible investor. We define responsible investment as the practice of incorporating environmental, social and governance (ESG) factors in investment decisions and active ownership. This allows investors to align their investments with their values and can also help portfolio performance.

ESG metrics gauge the impact of a company’s corporate governance and social and environmental track records, such as managing its carbon footprint and treatment of workers.  In doing so, it aims to improve a portfolio's long-term performance while positively impacting society and the environment.

Differences between the various types of ESG approaches can be confusing. Here are a few of the different approaches: 

ESG integration: The inclusion of ESG factors alongside financial analysis of assets by investment managers. The aim is to improve long-term risk-adjusted returns, mitigate ESG risks and identify investment opportunities created or supported by positive ESG change. 

Exclusionary screening: Excluding entire sectors, companies or countries from a fund or portfolio based on ESG criteria, moral or ethical views, or religious beliefs. The aim is to align investors’ money with their perception of ESG risk or broader beliefs and to mitigate ESG risks by excluding stocks such as tobacco or gambling companies. 

Positive screening: Investing in companies demonstrating positive ESG performance relative to peers. The aim is to achieve superior capital appreciation by mitigating ESG risks and acting on opportunities provided by companies demonstrating good ESG behaviours. 

Impact investing: Investing in companies, organisations and funds which have the commercial purpose of solving social or environmental problems. The aim is to generate a positive social impact by investing in companies that create tangible benefits for society and the environment that will endure over time.