How do you minimize negative impacts of investments?

To minimize the negative impacts of investments, it's crucial to start by defining your impact criteria. Knowing what kind of social or environmental impact you aim to achieve helps in aligning your investment choices. Frameworks like the UN Sustainable Development Goals or ESG criteria can be excellent guides in this regard. Tools like the Impact Management Project or the Global Impact Investing Network (GIIN) Impact Toolkit can then provide more granular insights.

After defining your impact criteria, the next crucial step is screening your potential investments to exclude those misaligned with your objectives. Various tools and databases can assist in this evaluative process. Here's how to proceed: Utilize Screening Databases: Tools like the US SIF Sustainable and Responsible Mutual Fund Chart or the Morningstar Sustainability Rating provide data on how different funds perform according to ESG metrics. Customized Portfolio Platforms: Services like Ethic or OpenInvest offer the ability to customize investment portfolios according to your specific values and impact goals. Such platforms automate the screening process, saving you time and ensuring alignment with your criteria.

Engaging with the companies or organizations in which you invest is a proactive approach to minimizing negative impacts. Here's how to effectively engage: Vote Your Shares: Use your shareholder rights to vote on company decisions, especially those related to environmental, social, and governance (ESG) issues. Your vote can influence company policy in a direction aligned with your values. Shareholder Resolutions: Consider supporting or initiating shareholder resolutions that advocate for changes beneficial to your impact criteria. These resolutions can be a powerful tool for altering a company's behavior. Dialogue and Engagement: Directly communicate with company leadership to discuss your concerns or suggestions.

A brown company doesn't mean a brown investment. Exposure to brown companies with purpose can be more beneficial than just going for the greenest companies. ESG improvers funds can be complementary to ESG leaders, exposure to issuers through green and sustainability linked bonds. ESG engagement funds can also be a credible way of gaining exposure and diversification while not losing sight of the overall goal. These won't minimise negative impact but may contribute positive impact particularly in public equities.

When monitoring and reviewing your investments a data management platform becomes a crucial component. If you can't measure it, you can't manage it. Whether you're tracking energy consumption, carbon emissions or water consumption, a flexible data platform is key for verifiable sustainability metrics.

When considering minimising impact, don't just try to minimise the impact of portfolio or holdings, consider the transition potential of companies as well. Brown companies have the most potential to improve and the highest positive impact from small changes to their business model. Practice active ownership, explore green bonds to enable them to add green assets and if you exclude companies be vocal about it and share with the broader market. Also be vocal about the need for companies held to have credible transition plans and publish progress towards their ideally science based targets