Healthy investing
Why you should treat your investments like your diet.
Last time we talked about the green economy and how we need to transition to a model that does not only focuses on profit but also on the planet and the people.
So today let’s look at what this means in terms of investments.
🧐 What is investing?
Investing in the share market means buying shares of existing companies that create value. Every company purpose is to create value. They create or transform something and sell it to someone with an added value.
Few companies have bad intentions from the beginning, however, at some point, some take shortcuts to maximise profits and along the way, create a negative impact on the world.
Some companies are doing things differently. They put more effort than others to have a positive impact on the environment and society – those are the companies that follow a strong ESG (Environmental Social Governance. More here).
Unfortunately, there are no proper international certifications that guarantee a business is doing an honest diligent ESG vs a greenwashing campaign. But that will arrive soon, thanks to Europe’s leading effort on that.
The BCorp label is one of those accreditation.
So when people buy shares of a company or buy shares of a group of companies (ETFs), most of the time, they do this to make a profit.
The thing is : when you buy shares, you are also deciding to support one business so it can grow and perform better over time.
Most of the time people only look at one side of the investment: The costs of the investment vs the profit (and dividends) expected. Most of the time they will aim for high profit, with low cost. And doing so is causing problems. We are missing the big picture, the long-term vision and the impact it creates on the world. Sure there are other factors that go into the investor’s mind when choosing a stock, however for the average Joe, probably not so much.
🌊 Bring it on
Thanks to services like Robinhood, Raiz and Spaceship, everybody can buy fractional shares of a company in a “simple” way from an app for just $1. So there is now a LOT of people entering the investment market who can have a vote on a certain business. The recent Gamestop wall Street takeover is an excellent example of the power of people on the fate of a public company. TLDR; a community of reddit decided to change the fate of GameStop and by massively buying shares they massively increased its price.
So we have now a wave of new investors that can have an impact on a business. A lot of them are not necessarily financially savvy, and most have no sustainability awareness. And that’s quite bad for the future.
🍔 ⚡️ 🥗
Let’s put things in perspective and take the example of food.
When eating, if you only look for the energy in the food, eg. calories (profit) and the price of the meal (cost), not only your health will be at risk, but also the impact on the environment could be really negative (if you don’t know what I’m talking about, go watch Cowspiracy).
You'll probably end up eating genetically modified and highly processed food. You would also get the cheapest industrial meat and fish. You may diversify your food (cans of ravioli, cans of beans, cans of etc.) but overall your health and the environment will be at risk. Following this diet sounds a bit silly for most “health-conscious” people today.
🤑 What about my investments?
Why don’t we have a similar view or rating for investments? Why people don’t care as much about the planet impact when buying shares?
🧑🔬 Hard to track, hard to measure.
Investors and the general public need to know what is the exposition of a company on the climate impact. Governments are just catching up with this and some better than others. UK and Europe are making climate risk reports mandatory for large companies. We’re not quite there here in Australia. But that will come.
Once you got those reports and the emissions each company produces, you need to make sense of them. For example, Bloomberg (a data giant) only holds CO2 emissions data for 57 members of the top 500 US companies (11%).
What if we had a simple way to weigh companies depending on their environmental impact?
Perhaps a bit simple (there are many other environmental impacts such as waste creation, recycling/upcycling, the toxicity of the process...), but at least it has the merit to very quickly give a sustainable score.
Now imagine if we could have a reliable accessible eco-score? We’re not too far off. Some countries (France) is leading in this. They have NGOs working actively in measuring the eco-score or companies and…products you buy, like food. Handy!
👵 Old myths
People assume that investing in a company that has a strong ESG, eg. that takes care of its employees, the environment or the society is not necessarily going to be a performing investment.
Wrong, data suggest that the businesses which have a long-term strategy align with ESG perform better.
🧞♂️Just tell me how
So how can you invest in companies that have a positive impact? Well, there are options, not all equal and simple. And that’s why we exist at Manyana, to make it simple yet rewarding and stress-less for you.
1/ Use robot-investing app like Stockspots, Spaceship, Raiz and choose their sustainable fund option.
Careful here. Because there is no “legit” accreditation to what a sustainable fund means, you would have to do a bit of research to choose THE green one aligned with your values.
Most of the time you will not be able to invest in companies that are actively trying to make the world a better place, but in companies with an ESG policy and not as bad as the others. For example, Apple has a great ESG score and they do re-invest some of their profit in environmental programs. But their goal is to sell you more stuff that produces a fair amount of greenhouse gas emission per year.
2/ Cherry-pick the company you want to invest in. It can be complicated, particularly if they are not listed in your country. There is also a financial risk in investing in single stocks. Expect to spend a lot of time doing so and a lot of stress on your potential financial gains or loss.
3/ Use impact-investing funds like this one.
Impact investing is different from ethical or sustainable investing. With impact investing you actually invest in companies making a difference to the world (eg. renewable energy or waste management). Those are environmentally good options, however, they may carry some hefty fees. Proceed with caution.
So here you go, never too late to start your healthy investing journey!
☝️And remember: the impact of the money you have in your bank or super, outweigh by far the effort you are doing on reducing your environmental impact.
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Manyana 🌱 Sustainable Money
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