“There has been a notable surge in interest in responsible investing among clients in recent years,” says Adrian Godwin, co-founder and managing director of Oaktree Financial Services. “This trend stems from a heightened awareness of environmental, social and governance issues, alongside a growing desire to align investment strategies with personal values.
“Public consciousness around climate change and social issues has intensified, complemented by the increasing encouragement and mandates from governments and regulatory bodies promoting transparency in ESG practices, which significantly influences investor behaviour.”
Godwin says younger investors, in particular millennials and Gen Z, are driving this shift by prioritising sustainability and ethical considerations in their investment choices.
For those new to investing, he advises: “First, it’s essential to define your values by identifying the specific issues or causes that matter most to you. Understanding your priorities will help guide your investment choices. Next, conduct thorough research to familiarise yourself with funds, exchange traded funds (ETFs) or individual stocks that align with those values, while also considering your risk profile.”
While responsible investing aims to support companies that make a positive impact, it is also crucial to focus on financial returns.
“When evaluating ESG funds, it’s important to remember the goal of achieving a return on your investment. Therefore, examining a fund’s proven track record is crucial; however, be mindful that many ESG funds are relatively new, which may limit the availability of historical performance data,” Godwin cautions.
He also recommends starting with small investments to build confidence while managing risk, and consulting a financial adviser who can provide a tailored portfolio aligned with individual values and goals. “This personalised guidance can make a significant difference in your ethical investing journey,” he says.
For those who want to start small, options such as Revolut’s smartphone app allows users to invest with as little as €1. Revolut holds banking licences across the Eurozone and the UK, offering a degree of credibility for cautious investors.
Rolandas Juteika, head of wealth and trading (EEA) at Revolut, highlights the platform’s zero-commission ETF investment plans, which have gained popularity.
“During the last year we have significantly expanded our product offering in terms of trading,” he says. “We have an offering of 1,500 exchange traded funds, and 309 exchange traded funds are related to ESG, so customers have plenty of choice to select any type of ESG-related investment.”
For those who don’t feel confident stock picking for themselves, Juteikas suggests the robo-adviser option, which provides tailored investment guidance, based on the investor’s individual goals and risk appetite, for an annual fee. The tool uses algorithms to manage investments, allocating money to model portfolios created by professionals.
Revolut’s data indicates that 4.5 per cent of robo-adviser investors in Ireland choose ESG-focused portfolios, ranking the country 10th in the EEA. In comparison, Belgium (7.8 per cent), France (7.5 per cent), and Hungary (5.9 per cent) lead in ESG portfolio adoption.
The rise of investment through apps has democratised access to financial markets, making it easier for young people to begin investing. Features such as zero-commission trading, fractional shares and simplified account opening have reduced barriers to entry. However, a report by the CFA Institute warns that some platforms take gamification too far, using techniques such as leader boards and curated recommendations to encourage excessive trading or risky investments.
“These same techniques can also be leveraged by firms to drive excessive trading, induce trading in complex or high-risk products, or encourage other harmful behaviours, all at the expense of clients,” the report notes.
The rising popularity of self-proclaimed investment “experts” on social media is also concerning, particularly if they are being paid to promote something. The CFA Institute cautions that influencers may have undisclosed conflicts of interest, potentially steering followers towards unsuitable or high-risk investments.
Ultimately, sorting the good from the bad in responsible investing requires due diligence. Seeking expert advice from professionals familiar with ESG ratings and regulatory landscapes can provide reassurance that your investments align with ethical considerations and sound financial principles. With careful planning and research, responsible investing can be both meaningful and profitable.
