As sustainable investment becomes increasingly sought by high net worth individuals RBC Wealth Management highlights the need for private investors to be clear about their intended goals of this “evolving theme”.

Speaking at a press briefing in London yesterday, RBC Wealth Management's head of portfolio strategy, George King outlined how a range of factors have contributed to the rising popularity of sustainable investing, including  government incentivisation, social impact investing, greater public awareness and industry validation such as the recent report from the UN International Panel on climate change.

“Sustainability as a theme has evolved dramatically over the past decade, as have the methods of implementation within an investment portfolio. Because of this investors need to understand where they sit on the spectrum of sustainable investing. As they increasingly look to invest in a way that reflects their view of the world, it is essential for them to understand the wide variety of portfolio construction approaches available to them,” said King.

“It is important for private investors to clearly articulate their desired approach with their advisors – whether they wish to take an unconstrained approach, take a fuller range of non-financial risks in consideration or directly invest in social projects that will deliver measurable returns,” King added.

“Defining the term”

Although it may be a term that is often “fraught with scope for misunderstanding”, RBC believes that sustainability is an area that must be discussed.

“It is a difficult topic because of all these nuances, because of the individuality of it, because of the difference in interpretation of the same set of facts, let alone the fact that the terms keep morphing. It’s a difficult thing to have a clear conversation around. But, all that said, it’s important to do,” King told journalists at the RBC press briefing.

Charities

Detangling the terms and clearly establishing a succinct approach is especially relevant for charity trustees, who are typically focused on generating income without breaching the charity’s aims or constitution, according to RBC.

“This tension between the search for income and the desire to be ‘ethical’, however how they define the term, is one that can raise significant debate amongst charity trustees. Recent changes to the Charity Commission’s guidance have opened up greater opportunities for trustees to implement mission-related investment to reflect the charity’s values and ethos, even though it may mean accommodating a lower rate of return,” said Nick Reid, head of charities, at RBC Wealth Management.