Name: How green is your investment?
Uploaded: 2023-01-11T14:06:35.406Z
Duration: 517.5

How Green Is Your Investment.mp4

How Green Is Your Investment_.vtt

English

{{00:00:00}}
Every company has an impact.

{{00:00:01}}
No company is perfect.

{{00:00:04}}
Every company will
have a negative impact.

{{00:00:07}}
They use natural resources or
they, face some tricky situations.

{{00:00:22}}
I'm Amanda Young, I'm the Chief
Sustainability Officer at Aberdeen,

{{00:00:25}}
having spent over 20 years in
responsible investment, and nearly

{{00:00:29}}
25 years in financial services.

{{00:00:32}}
Nobody's actually defined what
a sustainable investment is.

{{00:00:36}}
They've given you guidelines, so
what you might find is that you

{{00:00:40}}
have some fund managers who have
relatively weak terminology when

{{00:00:45}}
it comes to sustainable investing.

{{00:00:46}}
It might just be that they have good
governance structures, so therefore

{{00:00:49}}
it's sustainable, versus another fund
manager that has gone into great depths

{{00:00:53}}
to look at the activities that the
company's involved in, as well as how

{{00:00:58}}
it's managing its ESG credentials.

{{00:01:01}}
So you might have two funds.

{{00:01:02}}
One has a very high number of
sustainable investments, one has

{{00:01:06}}
a very low level, and actually
the one with low level has

{{00:01:10}}
better credibilities because the
standards to become a sustainable

{{00:01:13}}
investment are so much higher.

{{00:01:15}}
So this is where we're- what we're
gonna find is the regulators set

{{00:01:21}}
the boundaries, and at some point
somebody is going to accuse somebody

{{00:01:25}}
of greenwashing because they haven't
reached high enough standards.

{{00:01:29}}
But just how high do those
standards have to be?

{{00:01:31}}
Because if they- you make
them too high, you won't

{{00:01:34}}
have anything to invest in.

{{00:01:36}}
Every company has an impact.

{{00:01:38}}
No company is perfect.

{{00:01:40}}
Every company will
have a negative impact.

{{00:01:44}}
They use natural resources or they
face some tricky situations, but

{{00:01:51}}
they're all degrees and so, where do
you draw that line between a mining

{{00:01:56}}
company that really doesn't have
good human rights policies and is

{{00:02:01}}
actually doing something harmful to
its local communities, versus another

{{00:02:04}}
one that might have had an accident
for a variety of other reasons,

{{00:02:08}}
but actually it's standards and its
operations are really good and strong.

{{00:02:15}}
So degrees of sustainability
will create challenges when

{{00:02:19}}
it comes to assessing whether
something is green or not green,

{{00:02:22}}
or sustainable or not sustainable.

{{00:02:24}}
So how then do I, as an individual
investor, work that out?

{{00:02:29}}
It's tricky, isn't it?

{{00:02:30}}
Because you have social media
telling you this company's bad,

{{00:02:33}}
or that company's doing harm here.

{{00:02:36}}
You need to understand the policies
of the funds you're investing in.

{{00:02:39}}
So you need to know exactly what
their sustainability criteria.

{{00:02:43}}
And all funds, good funds should be
able to say, this is our philosophy

{{00:02:48}}
and this is how we apply it.

{{00:02:50}}
And then you need to look at the
underlying holdings within that

{{00:02:52}}
portfolio and work out whether it sits
with you as an individual investor.

{{00:02:56}}
And for some people it will,
and maybe for others it won't.

{{00:03:01}}
So that kind of- where's your
tolerance, in that sustainability

{{00:03:07}}
spectrum of colour, if you like,
probably needs you to actually go right

{{00:03:11}}
down and have a look at the individual
holdings and ask the questions.

{{00:03:14}}
Why is that in there?

{{00:03:15}}
Can they justify it?

{{00:03:16}}
Does it fit with the policy?

{{00:03:18}}
Despite some recent tightening of
regulations around greenwashing,

{{00:03:21}}
there's still a fear I think that
companies can say whatever they like

{{00:03:24}}
about how sustainable they are, but
it's quite difficult to verify that.

{{00:03:29}}
What's the best way to verify the
green claims of financial institutions?

{{00:03:33}}
So I think the important thing is to
understand the frameworks that they've

{{00:03:39}}
put in place, and also understand how
those frameworks are then applied at

{{00:03:45}}
an asset selection level, if you like.

{{00:03:49}}
Integration has to be
done by the fund managers.

{{00:03:51}}
It has to be done by the people
making the investment decisions.

{{00:03:55}}
So if the fund managers themselves
can't answer tricky questions about

{{00:03:59}}
why they made something an investment
decision, or the environmental

{{00:04:04}}
credentials of those investments,
that would leave you with quite a

{{00:04:08}}
lot of questions as to whether a
fund manager's actually doing what

{{00:04:12}}
it says it's doing on the tin.

{{00:04:14}}
So I think it's really important to
be able to question fund managers,

{{00:04:18}}
but a lot of people can't do that.

{{00:04:20}}
If you're an end investor, you
have to read the literature.

{{00:04:23}}
And what I think the fund management
industry needs to do is get to

{{00:04:27}}
the point where it can articulate
the outcomes of its responsible

{{00:04:31}}
investment, ESG investing activities.

{{00:04:34}}
So, what is your framework?

{{00:04:36}}
What are your standards?

{{00:04:37}}
How do you apply them?

{{00:04:39}}
And then you report against those
in a credible way that hopefully

{{00:04:44}}
is deep enough to give you a sense
that greenwashing is not happening.

{{00:04:48}}
Is that made more difficult by the
fact that it's not just the financial

{{00:04:52}}
institutions themselves that I
want to question as an investor,

{{00:04:55}}
but also then the next stage, the
companies that they're investing in?

{{00:04:58}}
Yes, it is.

{{00:04:59}}
Because everybody's view on
sustainability is different,

{{00:05:04}}
so what one person thinks is
sustainable, may not be considered

{{00:05:08}}
sustainable by another person.

{{00:05:10}}
Now, the regulation is
coming to try and give better

{{00:05:14}}
clarity and some consistency.

{{00:05:17}}
What worries me is that I'm not
sure the regulation really took

{{00:05:21}}
the end investor's voice into
account in building this regulation.

{{00:05:27}}
So we need to think about
that as an industry.

{{00:05:30}}
We need to say, well, what is
it that the end investor wants?

{{00:05:33}}
And ultimately they want to know that
the companies that we're choosing

{{00:05:36}}
to invest in have strong governance
systems, are not destroying the

{{00:05:41}}
world around them, are not, harming
their employees or local communities.

{{00:05:48}}
And this makes it very difficult in
this world of social media, because

{{00:05:54}}
you get stories instantly and
people form an opinion instantly.

{{00:05:59}}
So to have to constantly justify
with evidence what- the decisions

{{00:06:04}}
you've made can sometimes be quite
challenging, because someone's

{{00:06:08}}
perception could be quite different
from actually the reality,

{{00:06:12}}
within the investment process.

{{00:06:14}}
We've talked a bit about how things
are now, but obviously the whole

{{00:06:17}}
conversation around sustainability
has come quite a long way.

{{00:06:19}}
Can you talk a bit about where
we've come from and where you

{{00:06:22}}
see it going in the future?

{{00:06:24}}
Absolutely.

{{00:06:26}}
We have spent the last 10, 15
years explaining to the financial

{{00:06:31}}
services industry that ESG,
sustainability matters are material.

{{00:06:35}}
Ie.

{{00:06:36}}
If you're a mining company and you
operate in a water scarce area, if you

{{00:06:40}}
can't access that water, or your water
systems are really poorly managed,

{{00:06:45}}
that will have an operational impact
and potentially a financial one.

{{00:06:49}}
That's no longer acceptable.

{{00:06:50}}
Whilst you still want really
well-managed companies assessing

{{00:06:53}}
their externalities, their risks,
people now want to know what the

{{00:06:58}}
impact that that company has on the
world around it, rather than the

{{00:07:03}}
world's impacts on that company.

{{00:07:06}}
So it's important now to take the same
company in a water scarce area and

{{00:07:11}}
make sure that that company is not
contributing to that water scarcity,

{{00:07:14}}
is not denying local communities
access to that water, and it's having

{{00:07:19}}
a positive impact through its business
operations on its stakeholders.

{{00:07:25}}
And can you see a future where
that mining company isn't going

{{00:07:27}}
to get away with that anymore?

{{00:07:29}}
I think it's already happening.

{{00:07:31}}
Social media has been
transformative for the

{{00:07:34}}
responsible investment industry.

{{00:07:37}}
Companies can't hide.

{{00:07:39}}
What they do, what they say,
how they operate, how they treat

{{00:07:42}}
the employees, it's all easily
accessible and recordable.

{{00:07:45}}
You know, 30 years ago, the only
way you could see what a company was

{{00:07:49}}
doing was to sit and read once a year
it's annual report and accounts, and

{{00:07:53}}
it was all done on a piece of paper.

{{00:07:55}}
There was no sense of actually
understanding what the impact that that

{{00:07:58}}
company had on the world around it.

{{00:08:00}}
So it's already happening and
companies have moved considerably

{{00:08:05}}
over the last decade or so, to be
more transparent, recognise that they

{{00:08:10}}
need to develop a purpose beyond a
financial bottom line, recognise that

{{00:08:15}}
this maintains talent, it attracts
new talent into the firm, it creates

{{00:08:20}}
innovation, it keeps them relevant.

{{00:08:23}}
So there are really strong
reasons for having sustainability

{{00:08:27}}
credentials at the heart of
your operations as a business.

Every company will
have a negative impact.

They use natural resources or
they, face some tricky situations.

I'm Amanda Young, I'm the Chief
Sustainability Officer at Aberdeen,

having spent over 20 years in
responsible investment, and nearly

Nobody's actually defined what
a sustainable investment is.

They've given you guidelines, so
what you might find is that you

have some fund managers who have
relatively weak terminology when

It might just be that they have good
governance structures, so therefore

it's sustainable, versus another fund
manager that has gone into great depths

to look at the activities that the
company's involved in, as well as how

One has a very high number of
sustainable investments, one has

a very low level, and actually
the one with low level has

better credibilities because the
standards to become a sustainable

So this is where we're- what we're
gonna find is the regulators set

the boundaries, and at some point
somebody is going to accuse somebody

of greenwashing because they haven't
reached high enough standards.

But just how high do those
standards have to be?

Because if they- you make
them too high, you won't

They use natural resources or they
face some tricky situations, but

they're all degrees and so, where do
you draw that line between a mining

company that really doesn't have
good human rights policies and is

actually doing something harmful to
its local communities, versus another

one that might have had an accident
for a variety of other reasons,

but actually it's standards and its
operations are really good and strong.

So degrees of sustainability
will create challenges when

it comes to assessing whether
something is green or not green,

So how then do I, as an individual
investor, work that out?

Because you have social media
telling you this company's bad,

You need to understand the policies
of the funds you're investing in.

So you need to know exactly what
their sustainability criteria.

And all funds, good funds should be
able to say, this is our philosophy

And then you need to look at the
underlying holdings within that

portfolio and work out whether it sits
with you as an individual investor.

And for some people it will,
and maybe for others it won't.

So that kind of- where's your
tolerance, in that sustainability

spectrum of colour, if you like,
probably needs you to actually go right

down and have a look at the individual
holdings and ask the questions.

Despite some recent tightening of
regulations around greenwashing,

there's still a fear I think that
companies can say whatever they like

about how sustainable they are, but
it's quite difficult to verify that.

What's the best way to verify the
green claims of financial institutions?

So I think the important thing is to
understand the frameworks that they've

put in place, and also understand how
those frameworks are then applied at

Integration has to be
done by the fund managers.

It has to be done by the people
making the investment decisions.

So if the fund managers themselves
can't answer tricky questions about

why they made something an investment
decision, or the environmental

credentials of those investments,
that would leave you with quite a

lot of questions as to whether a
fund manager's actually doing what

So I think it's really important to
be able to question fund managers,

If you're an end investor, you
have to read the literature.

And what I think the fund management
industry needs to do is get to

the point where it can articulate
the outcomes of its responsible

And then you report against those
in a credible way that hopefully

is deep enough to give you a sense
that greenwashing is not happening.

Is that made more difficult by the
fact that it's not just the financial

institutions themselves that I
want to question as an investor,

but also then the next stage, the
companies that they're investing in?

Because everybody's view on
sustainability is different,

so what one person thinks is
sustainable, may not be considered

Now, the regulation is
coming to try and give better

What worries me is that I'm not
sure the regulation really took

the end investor's voice into
account in building this regulation.

So we need to think about
that as an industry.

We need to say, well, what is
it that the end investor wants?

And ultimately they want to know that
the companies that we're choosing

to invest in have strong governance
systems, are not destroying the

world around them, are not, harming
their employees or local communities.

And this makes it very difficult in
this world of social media, because

you get stories instantly and
people form an opinion instantly.

So to have to constantly justify
with evidence what- the decisions

you've made can sometimes be quite
challenging, because someone's

Explainer

Despite increasing legislation in the area of sustainable investing, fund managers don't always agree on definitions of sustainability. These variable standards can make it difficult for investors to fully understand the impact of their investment. 
Responsible investment expert, Amanda Young, explains some of the different criteria that investment companies take into account, and gives advice on how to make sure your money is being invested the right way. 

Sustainability

Investment

Next generation

Greenwashing

Green Investment

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Amanda-Young-iVBORw0KGg-9b954b02790836ffc1c5d6ccd0d457c3.png

Amanda Young

Chief Sustainability Officer

Without agreed definitions, investors can find themselves being greenwashed - led to understand that a fund is more sustainable than it really is. Young explains how to make sure you are fully informed about where your money is going.

Challenges for investors

Different people care about different things, and you need to questions the frameworks that your fund manager has put in. Do the frameworks and standards meet with your own sustainability expectations?

Different levels of tolerance 

For the past decade, thinking about sustainability has been about the material risk to a company. Now the focus is more on the impact that company is making on the world around them. 