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Making a positive impact with money

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MOST of us of a certain age, during those quieter periods of reflection, have posed the question: ‘What advice would we give our 21-year-old self?’

Replies might include studying overseas, staying in touch with friends, reading more books, worrying less, eating clean, living for today, burning the candle at both ends or, perhaps, always going home at 2am – as we know nothing good ever happens when we stay our later. The list is endless. Our lives are shaped by the relationships we form, the career choices we make and the successes and failures we celebrate or endure.

A relationship we all have to manage through our lives is the one with money. Financial advice to our 21-year-old-selves would be to follow three simple rules:

1. Spend less than you earn.

2. Prioritise investing for your future.

3. If you have to borrow, ensure you can afford to pay the money back.

Fast-forwarding to today, how should 21-year-olds be investing or, indeed, how should any of us be thinking about investing for our future? The question is posed – not in the context of long-term economic growth forecasts, central bank monetary policies or government spending plans – but against the backdrop of a growing climate crisis and rising inequalities between the rich and poor, men and women, young and old, the North and the South.

Affinity Private Wealth became participants of the United Nations Global Compact* in 2018 and have just received the annual letter from its chief executive and executive director Lise Kingo.

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In it, she describes how 2020 marks the ‘decade for action’ to address their fear that the world is falling behind on its bold agenda for meeting the 17 Sustainable Development Goals by 2030. 2020 also marks the 75th anniversary of the UN, which was ‘built on the cinders of two world wars’ and ‘formed on the understanding that nations must work together in unity towards common ends and in the service of humanity’. She believes in this coming decade, we will be defined by how we unite to tackle the world’s environmental and social challenges, be that as individuals, corporations or governments.

Solving these problems will, of course, cost money. For example the European Commission’s European Green Deal commits to publishing a plan to reach net zero carbon emissions by 2050. Goldman Sachs have estimated this could require up to €7 trillion of cumulative investment and will change the way electricity is generated, homes are heated, how we travel across the continent and household spending habits as a whole.

Those companies able to contribute, through their products and services, to the achievement of the increasingly ambitious climate policies are well placed to benefit from the heightened demand heading their way. Moreover, investors in those companies stand to be significantly rewarded too. For example, incremental renewable installations and overhauled power grids could, according to GS, help utility companies deliver earnings per share growth of 7% per annum to 2050. They also describe offshore wind energy generation as a ‘monumental opportunity’, estimating the global addressable market could expand by 20% per annum to 2030.

These are big numbers and neatly encapsulate the attractive long-term opportunities presented by sustainable investing. Increasing regulation, technological innovation and changing consumer behaviour will afford companies able to accelerate positive change to ‘green’ economies the ability to significantly increase profits.

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For the growing cohort wanting to make a positive impact and align their values with their wealth, this approach to investing meets both objectives. There is also recognition that failure to arrest climate change will leave the most vulnerable in our society even further behind. A recent survey conducted by the consulting firm Accenture and the UN Global Compact found that 88% of chief executives stated ‘there was a need to refocus our global economic systems to become more inclusive’. Again, companies at the forefront of this shift are likely to prosper and see their cost of capital fall, as their business models strengthen. Very good news for their investors.

We agree with the sentiment conveyed by Larry Fink, the chairman and chief executive of BlackRock, in his recent annual letter to chief executives. He says the environmental and social challenges we face, particularly those related to our climate, are ‘starting to reshape the world of finance’ and we are likely to see a significant reallocation of capital ‘sooner than most anticipate’.

At Affinity, we developed our sustainable strategy with the purpose of mobilising investors’ capital to be at the forefront of this transition. Following the unfolding media stories around heatwaves, wildfires, storms, droughts, floods and rising sea levels, we do so knowing we have created an investment solution which enables our clients to make a contribution, however big or small, to helping resolve some of the issues faced.

Returning to the theme of financing your future, is it clear that investing for impact is an empowering and engaging way to grow your long-term wealth, but how do you go about this? One place to start is with a wealth manager or independent financial adviser who can guide you through the process of establishing a regular savings plan or investing a lump sum. Take the time to understand the different solutions available, do your own research and be prepared to question and challenge. If you currently do not have the financial flexibility to save, but work for a company that provides a pension, ask if they offer a sustainable option – all our employees’ pensions are invested this way. Lobby your politicians to ensure States’ savings (such as the public pension and Rainy Day Fund) are also creating positive change. Speak to friends and family and encourage them to do the same.

Whether it be our 21-year-old-selves, or the 21-year-olds of today, making a positive impact with money is the type of advice we would like to give.

*The world's largest corporate sustainability initiative – see unglobalcompact.org.

Sources:

  • The EU Green Deal: Towards ‘net zero’. A plan to fight climate change – Goldman Sachs Equity Research, 6 January 2020.
  • A Fundamental Reshaping of Finance – BlackRock, Larry Fink, chairman and chief executive, 15 January 2020
  • Annual letter from the UN Global Compact: 20 Years of Uniting Business for a Better World, 13 January 2020

Affinity Private Wealth

We are a Jersey-based, independent wealth management company, enabling clients to align values with their wealth. We provide advice, structuring and investment solutions, including guidance on charitable giving and investing sustainably. Our ethics and values – the intangibles that count – are at the core of everything we do.

Our local expertise makes us unique in sustainable investing, as fund selection and all investment decisions are made here in the Island. Our ‘investment management miles’ are very low.

Affinity was the first Jersey firm to become a UN Global Compact participant, consistent with our commitment to sustainability. To us, this means making economic prosperity long-lasting, more socially inclusive and less dependent on the exploitation of finite resources and the natural environment.

We have been awarded Charter status by the Jersey Good Business Council, an initiative that highlights, celebrates and encourages the contribution of businesses in the Island to building a better community and a better world.

Biographies

With more than 60 years’ combined experience in finance, Russell Waite, Julia Warrander and Ben Stott are all senior members of the investment committee.

Russell was awarded the Sustainable Investment Professional Certification by Concordia University, Canada, in 2018. He loves the ocean and is a firm believer that corporate citizenship will prove an effective force in addressing global inequality.

Julia is a geography graduate and qualified landscape designer. She is passionate about diversity, educational access and wellbeing in the work place and is the vice-chairwoman of Brighter Futures.

Ben Stott is a champion of technology as a change agent for sustainability. He owns hybrid cars and an environmentally friendly home complete with heat pump, rain-water recovery system and solar panels.

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