5th June is World Environment Day, the perfect time to reflect on how you can make your money matter for a planet under threat.
Economic denial: a new climate change threat
Last week André Corrêa do Lago, the Brazilian diplomat leading this year’s UN Climate Change Conference, Cop 30, warned in an interview with The Guardian that the idea of reshaping the economy to combat the climate crisis is being undermined by those with vested interests.
With the science of climate change now widely accepted, the battleground has shifted. While voices denying the climate crisis itself are diminishing, populist governments and fossil fuel companies who oppose change argue that transitioning away from fossil fuels will harm the economy. This new form of denial suggests that climate action is economically irresponsible and will not deliver benefits to economies or people.
However, many respected economists disagree. Way back in 2006, Nicholas Stern, the former chief economist of the World Bank, produced his landmark study The Economics of Climate Change, concluding that ‘the benefits of strong and early action far outweigh the economic costs of not acting’. 15 years later, the results of a major study of economists who have published climate-related research ‘show an overwhelming consensus that the costs of inaction on climate change are higher than the costs of action, and that immediate, aggressive emissions reductions are economically desirable’.
Every one of us is a custodian of the planet, and our actions count. So, as individuals, what can we do to counter this economic denial? One thing is to make our money matter.
Make your money matter through ESG investing
Trillions of dollars worldwide are invested in pensions – an estimated £3 trillion in the UK alone – much of it invested in companies that are not putting the planet or people first.
The Make Your Money Matter campaign in the UK, co-founded by film director, Richard Curtis, conducted a study in 2020 which concluded that greenifying your pension is by far the most effective action an individual can take to reduce their carbon footprint, trumping driving an electric car, switching to a renewable energy provider and adopting a vegan diet.
In fact, it concluded that switching pensions was 21 times more effective than giving up flying, becoming vegetarian and switching to a renewable energy provider combined!
So if you want to make an impactful change to make your money matter, ESG investing is a powerful tool.
How to invest for a greener economy
The good news is that investors no longer have to sacrifice return for their principles. Many businesses are proving that sustainable and ethical practices that benefit the planet and people can also be highly profitable.
In 2024, McKinsey & Company concluded that ‘ESG-focused companies have lower volatility and higher risk-adjected returns compared to their peers, making them more attractive investments.’ In addition, sustainable businesses are increasingly more resilient, better governed and more forward-thinking than their less green competitors.
If you’d like to do your bit for the planet this World Environment Day and direct your savings and pensions towards ESG-aligned funds, we can assist with that reflects your values by shaping your portfolio through positive and negative screening, impact investing, and ESG integration.
Talk to us about how to make your money matter by investing ethically without sacrificing returns.
A leading provider of expat financial services and wealth management services across Asia.
