Explaining and Exploring Sustainable Investment - Flipbook - Page 8
Avoiding the greenwash
With the growth in demand for sustainable investment and a proliferation
in funds being launched, there are increasing concerns about so-called
‘greenwashing’. This is when asset managers talk up their credentials
without the required expertise or track record. We have come up
with five ways to tell whether funds, and the teams behind them, are
capable of meeting investors’ sustainable expectations.
1. Transparency
4. Activism
A genuinely sustainable fund manager should be transparent about
how they invest, as well as being open to be challenged. This should
include clear and simple information explaining how the team
runs money: what companies they look for under the sustainable
approach and what they avoid. Anyone can write a report on
climate change, for example, but how are funds positioned in light
of the huge challenges that combatting this will entail?
Engagement is a key part of sustainable investing and we feel
managers should be able to highlight a track record of holding
companies to account and encouraging them to improve. Managers
should be able to talk in detail about their engagement priorities
– whether diversity, tax transparency or plastic pollution – rather
than making sweeping statements. It is worth looking at managers’
annual general meeting (AGM) voting records: do they vote with
company management or actually challenge the businesses in
which they invest to improve?
2. Experience and resource
As in any walk of life, experience and depth of a team is important
when it comes to sustainable investing.
3. Knowledge and training
Sustainable investing is a specialist area and subjects like climate
change are fast moving so investors need to be confident their
managers have the required knowledge to run money in this way.
This can be anything from members of the team having specialist
qualifications to a general focus on training to ensure people
understand the latest sustainability trends.
8 - Liontrust: Explaining and exploring sustainable investment
5. Evidence
All this knowledge and experience in sustainability should be
applied to investment decisions – giving meaningfully different
exposure compared to more conventional funds. Are managers
able to show how their views are reflected in their decisions: is
it simply ESG data and reporting for the sake of it or making a
genuine difference to investment?
