In recent years, there has been a huge amount of media attention on how our societies affect the world around us. From rising sea levels to the plastic pollution in our oceans, human activity has affected the environment in many damaging ways.
If you’re concerned about the planet, you may be wondering how you can do your bit to tackle climate change. While cutting down on red meat and remembering to switch off lights when you leave a room can be a good start, you may be wanting to do more.
One option that you could consider is to invest your wealth according to “ESG” principles. These are essentially a set of criteria which aim to promote environmental consciousness and sustainability.
When it comes to investing ethically, there are a few lessons you can learn from our very own city-state of Singapore, so read on to find out more.
Singapore’s architects took a people-focused and sustainable approach to city planning
Dubbed the “Garden City” in 1967 by the then prime minister Lee Kuan Yew, Singapore boasts one of the greenest urban environments in all of Asia. Not only does it have lush rainforest right on its doorstep but it’s also home to several eco-attractions, such as the Gardens by the Bay.
While many urban areas across the world tend to grow at the expense of nature, Singapore took a different approach to its city planning.
For a start, its architects prioritised the wellbeing of its people when designing the layout of its streets. To reduce dependence on cars, many areas of the city were built with cyclists and pedestrians in mind, backed up by a reliable public transport system.
On top of this, the government was keen to integrate pockets of nature with the dense urban environment. Areas such as the Bukit Timah Nature Reserve and the UNESCO-listed Singapore Botanic Gardens both offer residents a great place to go and get away from the bustle of city life.
This sustainable and people-focused approach has helped Singapore to thrive, boosting people’s wellbeing and cementing its status as one of the most liveable cities in south-east Asia.
ESG investing aims to prioritise ethical and sustainable businesses
If you want your investments to align with your morals, there are some lessons to be learned from Singapore’s design philosophy.
For a start, it goes to show that prioritising sustainability doesn’t mean you have to sacrifice growth. While the city may not be designed in a purely utilitarian way, that doesn’t mean that the economy suffers for it.
In fact, quite the contrary, as according to figures from the Department of Statistics, the Singaporean GDP grew in real terms by 7.6% in 2021. Its decision to take a people-focused approach to urban planning has helped to keep its residents both happy and productive.
In the same vein, according to data from Morningstar, many sustainable funds have showed strong growth in recent years, both in absolute and relative terms. According to the report, of the 13 ESG index funds that were tracked, the average return in 2021 was an impressive 29.2%.
If you want to apply Singapore’s sustainable and people-focused approach to growing your wealth, you may want to consider ESG investing. This is a set of criteria used to assess the impact of a business and stands for:
This looks at how the company’s operations affect the environment. It may consider issues such as energy use, disposal of waste, and carbon emissions.
This criterion considers the company’s business relationships, such as with its employees and within its local community. It may include issues such as customer satisfaction and working conditions.
This looks at the management of the company and the standards to which it is run. It may include issues such as political lobbying or the fair election of board members.
The strategy of ESG investing largely grew out of the idea of “ethical investing”, which tries to screen out business that can have a harmful societal impact. For example, this may include firearms or tobacco manufacturers.
However, one key difference is that ESG investing aims to prioritise companies that show desirable traits, rather than just exclude the ones that don’t.
Working with a planner can help you to decide if ESG investing is right for you
If you want your wealth to make a positive impact on the world, investing according to ESG principles can be a great way to do that.
For example, a study published in Pensions Age considered the long-term effect of transferring pension wealth to a sustainable fund. Amazingly, the report found that this could be 21 times more effective at cutting your carbon emissions than stopping flying and switching to a vegetarian diet.
Of course, while this may all sound ideal, it’s important to bear in mind that ESG investing may not be right for everyone. Issues such as “greenwashing”, when companies inflate their sustainable credentials, can sometimes make it difficult to make an accurate comparison.
Furthermore, according to FTAdviser, while ESG stocks have seen strong growth in recent years, some analysts argue that this may not last forever.
If you’re considering investing your money in a sustainable way and want to know whether it might be right for you, you could benefit from seeking professional advice.
Working with a planner can help you to weigh up the pros and cons of this choice and enable you to make a properly informed decision. This can give you a greater sense of confidence that you’re growing your wealth in a way that’s right for you.
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