The Great Switch: How And Why To Move Pensions And Investments To Sustainable Funds
In recent years, we've seen a growing focus on sustainability and the urgent need to address climate change. One way to make a significant contribution to this effort is by switching pensions and investments from traditional funds to sustainable and low carbon funds. This blog post, explains the benefits of making this switch, how to do it, and why it's the greatest change to make for the environment.
Understanding the Impact of Your Investments
The carbon footprint of your investments can be significant. Traditional funds typically have an estimated carbon footprint of around 150 tCO2e (tonnes of carbon dioxide equivalent) per million euro invested. In contrast, sustainable and low carbon funds have a much lower impact, with just 50 tCO2e per million euro invested. By switching to these more environmentally friendly options, you can dramatically reduce your personal carbon footprint.
The Benefits of Switching to Sustainable and Low Carbon Funds
Positive Environmental Impact
By investing in sustainable and low carbon funds, you're actively supporting companies that prioritise environmentally friendly practices and reducing greenhouse gas emissions. This is an important step in the global fight against climate change.
Aligning Your Investments with Your Values
Switching to sustainable and low carbon funds allows you to align your investments with your personal values. By choosing funds that prioritise environmental, social, and governance (ESG) factors, you can ensure your money is being used to support companies that share your commitment to sustainability.
Long-Term Financial Performance
There's growing evidence that companies focused on sustainability and ESG factors tend to perform better in the long run. They are also less prone to disaster and bankruptcy and so make better investment for conservative investors. ESG funds have matched or outperformed traditional funds in the past, so it will be interesting to see if this trend continues into the future.
Reducing Risk
Companies that ignore ESG factors may be exposed to various risks, such as regulatory changes, reputational damage, and lawsuits. By investing in sustainable and low carbon funds, you can reduce your exposure to these potential risks.
How to Make the Switch
Switching your pensions and investments to sustainable and low carbon funds is easier than you might think. Here are the steps to follow:
Research Sustainable and Low Carbon Funds
Begin by researching various sustainable and low carbon funds. Look for funds with strong ESG ratings and a demonstrated commitment to reducing their carbon footprint.
Assess Your Current Investments
Review your current investment portfolio and pension plan to determine which funds are aligned with your sustainability goals and which ones need to be switched.
Contact Your Pension Provider or Financial Advisor
Reach out to your pension provider or financial advisor to discuss your intention to switch to sustainable and low carbon funds. They can guide you through the process and help you make the best choices for your financial goals.
Monitor and Review
After making the switch, it's important to monitor your investments and ensure they remain aligned with your sustainability goals. Regularly review your portfolio and make adjustments as needed.
Conclusion
Switching your pensions and investments to sustainable and low carbon funds is one of the most significant steps you can take to reduce your carbon footprint and contribute to a more sustainable future. By investing in funds that prioritise ESG factors, you can align your financial goals with your values, potentially achieve better long-term returns, and reduce risk.
About The Author
This article has been written and shared with our Knowledge Exchange by Ciarán Hughes from Ethico. “Ciarán Hughes is a financial planner at Ethico and an expert in ethical and sustainable investing solutions with 15+ years experience in financial services. Ethico is an ethical investment company that gives you a better way to manage your finances and can offer assistance with switching investments to sustainable and low carbon funds. Ethico offers sustainable investment solutions that promote positive social and environmental outcomes, while also working hard to deliver returns.”