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Today’s most successful investment strategies marry strong performance with an ethical approach. You can take full advantage of this as an IPS Capital client.
What is responsible investing?
As awareness of climate change and social inequalities rises, more people choose in a way that makes a difference in the world. Responsible investing, also known as sustainable investing, is about managing your wealth in a way that aims to change the world for the better.
While traditional investing focuses on financial returns, ESG investments take into account environmental, social, and governance issues to help support a sustainable future.
Environmental: A company’s impact on the environment.
Social: A company’s impact on its employees and society.
Governance: A company’s ethical standing and how it meets regulatory requirements.
Our responsible investment philosophy
Our aim is to be a leader in ESG investments. Ever since we began investing in renewable infrastructure in 2016, we have continued to broaden our approach.
When we invest, we seek businesses that are profitable, sustainable, and are aligned with your values.
Our responsible investment portfolios are built using best-in-class companies that are champions of specific long-term environmental themes. Examples of how we include sustainability as part of your portfolio are:
- Tackling environmental issues through green bonds
- Addressing global inequality through micro-lending institutions that help to alleviate poverty
- Supporting companies that tackle gender inequalities in the workplace
With us, your money is invested through fund managers who are experts in a particular sector, rather than in individual stocks. ESG ratings from investment consultant, Mercer, are also included in all our decisions.
In our view, the key to ethical investing is screening. There are two methods to assess the quality of a prospective ESG investment:
1. Negative screening
This is the more popular method, and involves the avoidance of firms or funds that engage in nefarious practices, such as arms dealing or producing fossil fuels.
2. Positive screening
This method takes the process a step further by pursuing investments that seek to make a difference, in areas such as clean energy, gender equality, or carbon offsetting.
Our approach to impact investing
Impact investing aims to achieve positive social or environmental benefits or change, while delivering a financial return. Today, pursuing positive social change is just as important as investing in a greener economy. This is why we allocate part of our portfolio to specific themes.
Examples of themes we consider crucial to achieve a positive impact are below.
Gender equality
There are socioeconomic reasons to prioritise businesses that manage gender equality effectively. In particular, companies that promote gender equality among their workforce often outpace their peers. Directing capital to these companies encourages wider adoption of these values.
We invest in funds that target the best employers for women on the basis of trackable metrics. These metrics include: the percentage of women on the board of directors; the percentage of women in management; the overall percentage of women in the workforce; policies for paternal and maternal leave; flexibility around working from home; and whistleblowing policies.
In our view, companies which embrace talent and diversity are more inclined to consider the impact of ESG risks and opportunities, and will be better positioned for the challenges of tomorrow.
Financial inclusion
Access to financial services (including microfinance) is considered an enabler to end poverty. We aim to invest for both impact and financial gains by investing with trusted partners who lend to financial institutions in emerging and frontier markets.
This way, we can indirectly support small and medium enterprises in the area, as well as positively contribute to inclusion and reduce inequalities, while collecting a positive return.
Renewable energy
We invest for the green transition by providing capital to generators of clean energy. This is an underappreciated opportunity by the market to make an impact, as well as generate positive returns, particularly with the Inflation Reduction Act underway.
Technologies we have exposure to include: wind; solar; hydro; anaerobic digestion; and batteries for energy storage. The latter in particular help the transition to net zero by fixing the inherent intermittency problem with renewables, thus providing essential infrastructure to accelerate adoption worldwide.
OUR APPROACH
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