4 ethical investment tips as banks go green
Before COVID-19 impacted our work lives, many businesses were reducing overhead costs by greening their businesses.
The ability to benefit bottom line earnings is a clear advantage of looking for more sustainable ways to operate, but there is one further benefit. For privately run businesses, green business practice attracts more customers. For public companies, it attracts more investors.
Businesses with strong environmental and social credentials are more resilient in times of economic crisis, according to research conducted by Professor Chendi Zhang into the COVID-19 stock market crash.
Zhang, a professor of finance at the University of Exeter Business School recently measured the performance of US stocks in the first quarter of 2020.
His research found that even though financial markets saw their fastest ever collapse due to the coronavirus pandemic, companies with high ESG (environmental, social and governmental) ratings outperformed those with low ESG ratings by 7.2 per cent.
“These policies act like a risk management policy,” said Professor Zhang. “The COVID crisis has affected financial markets everywhere, but we found that firms with green policies or that take social responsibility seriously are less affected by the crisis.”
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The greening of Australia’s banks
Late last year, National Australia Bank priced a $300 million green bond to help improve the environmental performance of shopping centres owned by QIC Shopping Centre Fund (QSCF).
QIC is one of the largest shopping centre landlords in Australia and the QSCF green bond is the world’s first Climate Bond-certified green bond to be issued by a retail property landlord.
It followed the establishment in March last year of the Australian Sustainable Finance Initiative, a co-operative between Australia’s major banks, insurers and superannuation funds which, in the wake of the current pandemic, has called for an economic recovery focused on addressing climate and social goals. Its aim is to future proof the economy and create career pathways for jobs.
It’s an ambitious plan that make take some time, but in the here and now there are green investment options within the banking sector that won’t break your bank, but will give you some confidence in the banking industry’s green initiatives.
UBank offers first Green Term Deposit
UBank is giving customers the opportunity to have their savings matched to a portfolio of renewable energy projects such as wind and solar energy and low carbon buildings with UBank’s world first Green Term Deposit.
UBank is a division of NAB, so when you invest funds in a UBank Green Term Deposit, NAB will hold at least an equal amount in a pool of lending for projects and assets eligible for certification under the Climate Bonds Initiative (CBI).
The bank’s Green Term Deposits offer a simple, dependable, low risk way to earn interest on your savings with a fixed return that may actually do some good in the world.
The minimum investment is $1,000 per account, with the maximum investment hitting a lofty $2 million per account. You can qualify for a Loyalty Bonus if you make no partial early withdrawals on that Term Deposit and rollover the entire principal or add additional funds.
Green investing tips
If you are looking at investing in banks, businesses, Managed Funds or Exchange Traded Funds (ETFs), for your green investment fix, here’s four things you can do:
- Be aware of Environmental, Social, Governance (ESG) metrics and investment screening. You want the company’s underlying investments to line up with your ethical views.
- Do your own due diligence. If you are buying into Managed Funds or ETFs, have a look at how diversified they are across sustainable and ethical companies.
- List your own ESG preferences: what do you consider fits the bill and what asset classes appeal to you.
- Consider a balance of ethically sound investments, with investments that may still generate a high return on your portfolio.
As the world becomes more woke to sustainability initiatives, it is likely institutions such as banks as well as listed and unlisted businesses, will have to keep up with your beliefs in order to build on their profits.
This update is not financial advice. This article is general news and information.
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