For centuries, the Rhine River has been a significant transport hub, carrying vital commodities between Switzerland, Germany, and the Netherlands. Today, over 6900 vessels can transport 10 million tons of cargo.
Effects of Global Warming
Unfortunately, the effects of global warming are very real. The drought in Germany has caused the Rhine River water levels to drop to their lowest level at below 40cm in some places. This is disrupting the commercial artery for up to 80% of Germany’s inland shipping of goods, as many vessels can no longer use the river to transport crude oil, natural gas and other goods. This phenomenon has become more common over the last decade as global warming affects river levels.
This has forced industries to explore workarounds and to use alternative forms of transportation, such as trucks and trains, or acquire low-level barges at a much higher cost, with a significant impact on the economy of the Rhine Region.
This leads us to wonder how we can make a significant contribution towards saving the environment short of becoming a climate change activist. We recycle, watch our electrical consumption and look for more economical ways to travel, but there is more we can do.
Adding ESG funds to our portfolio allows us to contribute to the environmental cause and grow our wealth.
Why ESG investing?
ESG investing, also known as sustainable or socially responsible investing, is an approach to investing that considers environmental, social, and governance (ESG) factors alongside traditional financial metrics. The goal of ESG investing is to generate positive societal and environmental impact while also seeking financial returns.
It’s not just about avoiding companies with negative impacts; it also involves actively seeking out companies that exhibit positive ESG qualities. This can lead to investment decisions that align with an individual’s or institution’s values and contribute to a more sustainable and equitable future.
Environmental
The E part of ESG focuses on a company’s impact on the natural environment. It considers factors such as carbon emissions, water usage, waste management, renewable energy adoption such as using solar energy, and overall environmental sustainability, meaning the company reduces its carbon footprint on the earth.
So why ESG funds? Besides these companies lowering their carbon footprint and helping the environment, companies in ESG funds have a history of offering good returns and often exceeding the returns of their non-ESG competitor funds. They also have a lower risk of financial disaster because of the transparent ESG principles and reporting that are followed in the everyday running of the companies.
Investing Choices
As more investors are aligning with ESG investing, they have several options when it comes to investing.
Negative Screening: Avoiding investments in a company, business or industry that has significant negative impacts on society or the environment. For example, avoiding investments in fossil fuels, tobacco, or weapons.
Positive Screening: Actively seeking out investments in companies that are leaders in ESG performance. These companies may have strong sustainability practices, diverse boards, and positive community engagement.
Impact Investing: Making investments with the explicit intention of generating measurable positive social and environmental impact alongside financial returns. Impact investments often target specific social or climate challenges.
Integration: Investors incorporate ESG factors into traditional financial analysis to assess a company’s overall risk and growth potential more comprehensively.
Engagement and Advocacy: Engaging with companies through shareholder activism to encourage improved ESG practices and transparency.
ESG-themed Funds: Investing in mutual or exchange-traded funds (ETFs) that specifically focus on ESG criteria.
Climate change and saving the planet, is a very real dilemma that is here, and not something we can leave to our children to solve. Through ESG investing, we can make a significant contribution to the cause and potentially make a profit whilst holding these companies accountable.
Chat with your investment advisor about diversifying your portfolio with ESG funds.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your investment advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.
