Building a planet-friendly portfolio

Dear Money Lady,

We’re just starting to invest and wondered if there were any good investments you could recommend. We want something that makes money, of course, but also promotes environmental change and social justice.

Thanks,

Melanie

I don’t get asked that question often and am very glad to answer it.

So, how can a small investor empower change and impact the world we live in for our children and future generations to come?

In the past it was virtually impossible for everyday investors to apply their beliefs and values to their portfolios, but now they can. Sustainable portfolios have been around for several years and now, more than ever, they are coming to centre stage, as more people want to show their commitment to positive environmental and social changes.

When you invest in sustainable portfolios, you are really making a stand towards global responsibility and environmental change. So, what are they?

Offered mainly at large investment firms, a sustainable portfolio would include a guided stock portfolio of proven, high-quality companies which demonstrate superior corporate governance, business ethics, labour and human rights standards, as well as responsible attitudes and approaches to climate change, water management and pollution.

If you’re thinking of changing your portfolio to hold more environmentally sustainable options, be sure to do your research. Not all investment firms hold a socially responsible platform, and many are still not forward-thinking when it comes to global change. This request should be something your financial planner takes very seriously — not touted as a sales ploy to get your assets on their books.

Most large brokerages who believe in the value of sustainable portfolios will be rated A+ by the UN Principles for Responsible Investments and will provide investors with a framework and product offering for a wider impact and active management philosophy. Ask about the firm’s assets under management in this sector — if they are serious, they should have at least $2 to $5 billion. Portfolios should always be actively managed from both a top-down and bottom-up perspective and evaluated using macroeconomic and geopolitical factors. with specific selection processes in place. Short- and long-term risks should always be mitigated in the fund analysis to ensure strong portfolio returns.

Those who wish to enhance their existing portfolios with a small portion of sustainable stock options can choose from a variety of mutual funds. These are generally always actively managed funds, with many offering downside protection, risk control, flexibility and the potential to outperform the market. Talk to your adviser. Do your homework, always be well diversified when investing, and do your part in creating a better world for us all.