Public interest in impact investing is growing at a rate of knots – and for good reason. In far too many countries, there’s a shortfall between cash pledged by government towards averting the climate crisis – and the kind of sums really needed. Harnessing private capital can certainly go some way in making up for this.
Sugi is the UK’s first app to check your carbon impact, compare investments and help you build a greener portfolio. We asked the organisation’s founder, Josh, about using data to your (and the planet’s) advantage.
[Maddyness] Tell us about your background and what led you to founding Sugi. Give us a brief overview of what it does.
[Josh] I’m fairly headstrong and never follow instructions, so becoming a corporate lawyer out of uni was probably a bad idea. But during my brief days in the City, I encountered one of the very first environmental investment funds. I was hooked by the idea that private money could be harnessed for such a positive mission. I left law, took a master’s degree in environmental technology and started working in conservation finance. It turned out that there was a whole industry dedicated to driving private finance towards sustainable development.
All the focus, however, has been on the big players – development banks and institutional investors. This will never be enough.
We need individual investors, and the vast pool of private capital they control, to shift to green. That’s why I started Sugi.
Sugi is a completely new way for everyday investors to engage with green investing. We’re the first platform to give users a carbon profile of their investments, comparing them with industry benchmarks and similar investments in the market. For the first time, people can see how green their investments are and take action to improve their impact.
Why is green investing so difficult at the moment? Is there more risk attached to green investments?
There are a huge number of everyday investors in the UK. In 2020, the market was worth £210B. And survey after survey shows most people want their investments to have a positive environmental impact. But very few actually engage with green investing, mainly because it’s overly complicated and confusing and the information people want isn’t available.
For example, there are hundreds of impact, ESG, socially responsible and sustainable investment products and no set criteria for using these labels. The result is a mass of greenwashing. And even when investment products are perhaps legitimately labelled, the reasons behind the labelling are not clear.
Some ‘green’ investment products include fossil fuel stocks because they are ‘best in class’; others boast low carbon emissions because they are heavily weighted in favour of technology and financial services stocks, which means they’re low carbon by coincidence rather than design; others still may score well for social responsibility but have poor green credentials. Most people don’t have the time or patience to work through all of this.
Green investments aren’t necessarily more risky than ‘normal’ investments. When you’re choosing a green investment, there are more aspects to consider – and these aspects may or may not translate to an associated financial risk. Arguably, non-green investments may be more risky.
When a company hasn’t considered green issues in its decision-making, it may be more exposed to the risks of climate change, whether that’s because its facilities might be flooded, its competitors get the jump on new low-carbon product lines, or it could even be sued by its own shareholders for lack of long-term planning. We’ve seen some of that in the news recently.
How has demand changed in the past few years?
Demand for green investments has soared, particularly over the last 18 months, due to two main factors.
Firstly, climate change is now firmly on the global agenda. With all eyes watching the Biden administration’s transition to power (and the subsequent climate change policy that will follow), ‘greening up’ has never been more of a priority for businesses and individuals.
Secondly, since the start of the COVID-19 pandemic, reports have continually claimed that ESG funds are outperforming ‘traditional’ investments. Going green is no longer cited as a ‘nice to have’; rather, these reports demonstrate the value and resilience of ESG funds to the investor community, increasing demand.
It’s now arguably more notable to find an asset manager who hasn’t committed to sustainable, ethical, responsible, impact and/or ESG (environmental, social and governance) investing than one who has.