Investing responsibly is quickly becoming the path of choice for many investors. In 2021, money continues to pour into these kinds of investments month after month. And there are no signs of inflows slowing down anytime soon!
Here’s why so much cash is being put into this type of investment and what we’re likely to see in future as a result.
What does investing responsibly mean?
You say tomato, I say tomato. That saying doesn’t appear to make as much sense written down, but you know what I mean.
Everyone has a different definition of what they think is ethical or responsible. Evel Knievel believed it was responsible to jump over cars with a motorbike and I think it’s irresponsible to ride a bicycle on gravel. It’s all about perspective.
Recently there’s been a general sway towards investments thought of as less harmful. In some cases, this socially responsible investing (SRI) means using ESG investing methods. In others, it simply means putting cash into firms trying to improve the world in some way or avoiding fossil-fuel businesses.
But whatever way you look at it, investors are just being more conscious about where their money is going. Investing is no longer all about profit and growth at any cost. This wide and sweeping change in attitudes is quickly altering the whole landscape of money.
How much is going into responsible investments?
According to the latest data from the Investment Association, a whopping £1.5 billion was put into responsible funds during October!
Emma Wall, head of investment analysis and research at Hargreaves Lansdown, explains these big figures: “Responsible funds continue to see significant inflows from retail investors keen to do good and make money at the same time.
“With an extra £1.5 billion invested in October, this now takes the total invested in responsible funds to £88.7 billion. It is small fry compared to the wider market, at just 5.7% of funds under management, but making inroads.”
Will this trend of responsible investments continue?
Although responsible funds are swelling in popularity, the bulk of investors’ money can be found elsewhere in the markets.
However, this means that there’s a lot of potential for these funds to grow as investors rotate some or all of their holdings into more ethical investments. Here are the two big topics on people’s minds right now:
- Climate issues
- The coronavirus pandemic
The awareness of big global problems coupled with lots of younger investors joining the market means there’s no reason for these responsible trends to slow down anytime soon.
What may lay ahead for investors?
You now have more control than ever over where you invest your money. It’s an exciting time to be an investor and although some companies and industries may fizzle out over the coming years, new ones will rise up to take their place.
Using one of our top-rated share dealing accounts, you can find the responsible stocks and funds that suit your goals. It’s also worth using something like the Hargreaves Lansdown Stocks and Shares ISA for your investments. This type of account is a great way to protect any gains from tax.
Just remember that no one can predict the future. When it comes to investing, you may get out less than you put in. So be sure to do your research and always have a long-term plan to help you on your journey.
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About the author
George is a writer and qualified financial adviser focused on educating others in personal finance & investing.
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