What is sustainable and ethical investing?
When you invest sustainably, you can help try and change the world for the better - while also potentially making a profit so a positive return on your investments.
At Aviva, we define sustainable investing as ‘an approach to investing that incorporates environmental, social and governance (ESG) factors into investment decisions, to better manage risk and with the aim to generate sustainable, long-term returns’.
Investing sustainably means choosing companies that are aware of the environment, their employees and their customers. That could mean businesses which have a positive work culture and treat their employees well, or those creating clean, sustainable energy using wind farms or solar panels. If you want, you can also invest in line with your personal ethics. For example, by excluding industries like tobacco and gambling. Investing in this way is referred to as ethical investing.
To help people identify funds which invest sustainably, the UK and other governments are introducing sustainable labels for funds. These are intended to help you choose investments that suit your priorities.
Remember, as with other funds, the value of your investment can go down as well as up and you could get back less than invested.
The three 'ESG' measures we use to assess sustainable investing
Sustainable investing looks at business credentials across three measures: the environment, societal issues and how businesses are run (their governance). We describe these factors in detail in the section below.
Environmental issues
This includes things like:
- a company’s carbon footprint
- using renewable energy
- a firm's waste management policies
Social issues
This includes things like:
- labour standards among the businesses in a company's supply chain
- secure data protection
- health and safety of employees
Governance
This includes things like:
- conflicts of interest and who's on a company's board of directors
- political lobbying
- bribery and corruption
ESG options and how they work with our funds
Universal Retirement Fund
Our Universal Retirement Fund is designed to give you a simple way to save for retirement, with pension investments you don’t have to manage.
- Your mix of investments will be based on the time until you retire.
- We’ll change them for you so they’re typically less risky as retirement approaches.
- How you take your pension benefits is up to you.
- We think about ESG criteria, as explained above, when choosing your investments.
Ready-made funds
Ready-made funds are a good option if you're new to investing because they do the hard work for you. All you have to do is choose how risky you want your investments to be.
- Select a portfolio of funds managed by Aviva Investors, our dedicated asset manager.
- While ready-made funds don't necessarily target specific ESG outcomes, looking at how the investments in the funds might impact the climate and society is certainly something we take into consideration when selecting funds for our ready-made list.
Experts’ shortlist
You can pick your funds from our experts' shortlist, which is a list of hand-picked funds that our team think could perform well.
- A list of funds that stand out from the crowd, according to our experts at Aviva Investors.
- Built using a tried-and-tested process with ESG considerations at every step.
- There is also other criteria (not just ESG) that we think about when we choose investments.
Select your own funds
You can build your own customised portfolio by choosing your own funds from the range we have to offer. This is for confident investors.
- Research and pick your own investments.
- Use filters to fine-tune the credentials of the funds you’ve chosen.
- Choose funds that our experts have rated the best for managing the biggest ESG risks and opportunities.
You can find out more about ethical investing here.
Review your investments and the funds you are invested in regularly.
Do you know if your money is invested sustainably?
As an investor you have the power to influence how and where you invest your money. Our short video summarises how your pension contributions can become sustainable investments.
Transcript
If you’re in a pension where your money will be invested in funds, do you know where your money goes?
When you invest, how much do you really know about what happens next?
Let’s pretend for a moment you could follow your money on its journey and see what happens.
Basically, your money goes into the funds you choose. It’s the managers of these funds who decide how it should be invested.
In order to try and make your fund grow they invest in a range of assets which will often include shares of large companies traded on the stock exchanges around the world and these companies can play a major role in shaping the world we live in.
The performance of funds is normally available for everyone to see at any time.
This sounds like a good thing, but it could actually lead to short-term decision-making. Let’s look at why…
Imagine the pressure you would face from being constantly monitored. Fund managers need to show the investments they make are growing in the short term.
As a result, companies are also pressured to act in the short term to show immediate returns.
Long term benefits such as investing in innovation, workforce skills, or the efficient use of natural resources can slide down the priority list – as can the societal and environmental impacts of things like carbon emissions and air pollution.
In the long-term this can actually lead to weaker companies and lower profits…
Because in reality it’s good companies that treat their customers, employees, the local community and the environment well that make sustainable investments…
When planning for retirement, you invest in your pension to improve your prospects for the future.
Your goal was to create a better future for yourself, and your family, but the result could well be a future you’d never have chosen.
There’s no one quick fix, but these are the steps we can take.
Remember those funds that your pension money goes into? A large number of people invest in them – so together you have huge power.
If you insisted that your money was invested responsibly, it could really help to change the world unleashing trillions of pounds of sustainable investments.
But not many people ask how their money is being spent.
As an investor, you have the power to influence where your money gets invested.
Investments can fall as well as rise and you may get back less than invested.
When deciding where to invest please consider all investment options available to make the right choice for you.
Common strategies for sustainable investing
We’ll talk you through some of the most common strategies for sustainable investing. You can pick as many as you want, so a few could apply to any one fund.
Ethical investing
Investing that's driven by your ethics, and aims to drive personal social and environmental outcomes, and avoid controversial industries, like alcohol or tobacco. This is based on your personal views. Please note that financial performance is not priority of ethical investing.
Impact investing
Investing in transitional funds that aim to deliver positive social or environmental impact, such as tackling climate change.
Thematic investing
Investing into companies that support a particular theme for example Shariah Law and Cybersecurity.
Sustainable investing
ESG fund managers consider and integrate environmental, social and governance issues as part of their wider research, as they think ESG factors are key to the long-term performance of a company.
Sustainability Labelling
Sustainability labelling and consumer-facing disclosures (which are provided to outline the sustainability features of an investment) are there to help you compare different funds.
Investing sustainably with us
Use our investment preference tool to find funds that match your values across environmental, social and governance (ESG) issues. Capital at risk.
Frequently asked questions
Do sustainable investments have a lower return on investment?
Open an account
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Aviva Stocks & Shares ISA
Keep your investments tax-efficient with our ISA. Tax treatment depends on your individual circumstances and may be subject to change in the future.
Aviva Investment Account
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Aviva Pension
Enjoy your retirement knowing your pension money could help build a better world for generations to come.
Learn more about investments
Not sure if you should invest? Our educational articles will help you learn more.
Top up your knowledge
Keen to understand more about funds and investment risk, or learn all about ISAs? Our articles can help beginners and keen investors understand more about the world of investing.
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