We take a responsible investing approach within our Royal Bank Invest funds. This means we consider environmental, social and governance (ESG) factors when making investment decisions.

While we believe responsible investing remains a priority, there were media reports last year suggesting it was going out of fashion and being replaced with newer trends. There are, however, credible grounds for continuing to believe in the importance of sustainable investing.

Examples include:

• the Intergovernmental Panel on Climate Change documenting how global temperatures continue to rise
• unacceptably high rates of biodiversity loss, according to the United Nations Environment Programme
• increased levels of extreme poverty found in research by the International Monetary Fund.

Because these aren’t going to be resolved overnight, there’s still a need for investing in change.

Many in the financial services industry have fallen foul of greenwashing – the overstating of ESG efforts within marketing. This has resulted in a loss of trust from investors in recent years and a demand in improved classification and transparency within sustainable investing.

Regulators are now working on creating standardisation, greater transparency and parameters around greenwashing, particularly regarding investment advice. 

The UK’s regulator, the Financial Conduct Authority, released its Sustainability Disclosure Requirements in November last year. One significant change will be to determine if ESG-related labels, if any, are relevant to investment products.

Investors will benefit from this as they can make more informed investment decisions, cutting through the noise, and will hopefully result in the rebuilding of trust in responsible investing.

With these moves to help rebuild trust in mind, we believe sustainable investing is very much alive and remains an important way to mitigate risk and seize new opportunities when investing.