Environmental, Social and Governance based investment (ESG)
Now that the awareness of ESG investment has become more widespread, I thought a dive into a single issue might illuminate.
Water
The supply and consumption of water can touch all aspects of ESG investment. Modern life would be impossible without a reliable supply of clean water. There is plenty of water in the world, but having it in the right place at the right time and of suitable quality can be an issue.
Some water companies generate substantial profits. They treat, transport and deliver water to domestic, commercial and industrial consumers. They use water from underground aquifers for relatively clean water and they use rivers and the sea to discharge effluent. All these things create environmental issues – but they allow the UK to enjoy some of the lowest charges for clean drinkable water.
Investors in water companies can receive share dividends and capital growth, and companies have to make acceptable charges. These charges come from measuring fresh water consumption, a proportional amount for treating foul water, a standing charge, a charge based on the ‘rateable value’ of a property or a combination of all these. A household charged by rateable value has little incentive to save water because there is no financial impact on wasted water. A family reducing fresh water consumption pays less for treating sewerage because the services are linked – can either be morally right?
There are instances in the U.K. where chalk streams have dried up because the water authority has extracted too much from the underground aquifer – or an extraction licence for agricultural or industrial use. The environment suffers, biodiversity reduces, and crops fail for water supply and consumption reasons.
If shareholders and regulatory bodies fail to make an impact and continue with financial support – the future will become unsustainable. One way to have an effect is to invest in companies that do the right things consistently. If we continue making short-term decisions, some aspects of life will change forever.
If this or other considerations are important, speak with your independent financial adviser to test your existing investment or pension portfolio to ensure it matches your expectations.
Eamonn Dorling Dip PFS
Senior Independent Financial Adviser
Brooks Wealth Management
Tel: 01733 314553 or 07767 795816
Email: Eamonn@brookswealth.co.uk