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Will 40 shades of green help my pension grow?

Updated: Jan 31

According to the financial times by moving €100,000 pension pot in a traditional portfolio with oil and gas companies to a positive impact portfolio is the same as taking five cars off the road a year.


I personally like the idea of moving my money to a portfolio that will help the future of our planet. I like the idea of making money and having a positive impact at the same time. Traditionally, it was thought that money and morals don't mix. That paradigm is now being challenged.


The questions I typically get.


Will I get a lower return if I go green?


According to the financial times, In July 2020, Morningstar examined the performance of 745 Europe-based ESG funds and found most had performed better than non-ESG funds over one, three, five and 10 years.


Where is my pension fund invested today?


The majority of people who've pensions in Ireland today will struggle to answer this question. Why? They're either not interested, don't have the access or they don't have a good financial planner. This is really important to know as you may be in funds that don't align to your values or in funds that may not give you the returns you expect over time.


Does my fund aligns with my values ?


It's highly likely if you haven't reviewed your pension or investments in the past 12 months you're invested in traditional funds, potentially made up of companies known as the "sin stocks" like alcohol, tobacco and weapons.


What is a positive impact portfolio? Sounds like more jargon...


In Ireland today pension savers and investors are offered a growing range of sustainable fund options via their pension or savings products.


A traditional pension fund is made up of a collection of company shares packaged together and sold to people like you in Ireland. Anyone with €75 can start saving into traditional managed funds. Companies like Irish Life, New Ireland, Zurich and Standard Life offer over 9000 funds to the Irish Marketplace. Some of these funds will have over 50 years track records on performance. The new funds like ESG funds have a shorter track record, approximately 20 years.This means it's still early days.


A green fund or ESG fund is made up of companies with strong environmental, social and governance factors. Companies in Ireland like AIB, Irish LIfe and DCU score high.







 

Environmental means how the company interacts with the environment

  • Climate change

  • Natural resources

  • Pollution & waste

  • Energy use


Social means how the company interacts with society

  • Working conditions

  • Employee relations and diversity

  • Data protection


Governance means how the company is run

  • Executive pay

  • Board diversity

  • Risk management


 

Examples of ESG funds in Ireland

  1. Green Effects Fund

  2. Amundi ESG Fund


Conclusion:


When it comes to investing your hard earned money (savings, investments or pensions) be it a small amount or your life savings. The principles of investing remain the same. Before picking new funds or switching from funds that no longer align to your goals and values.


Step 1: Speak you a Financial Planner - I like this green offering in Ireland - (ethico.ie)

Step 2 : Re- assess your attitude to investing

Step 3: Set a clear goal for you money or adjust your goal

Step 4: Decide what you won't tolerate in your portfolio


As a previous financial advisor and someone who wants to invest in companies who are making a positive impact on the world my next step is to review my pension to understand if I have the portfolio that suits my need.


* This is not financial advice but my own views based on my experience in the industry. If you want advice I recommend you talk to a qualified advisor.




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