Sustainability in the Construction Industry
It’s a well-documented fact that the construction industry has a huge impact on the environment, and a major responsibility to look at ways that this can be mitigated. Amongst the more widely known initiatives to make improvements in areas such as emissions or the use of sustainable materials, financial strategies such as investments can be overlooked, but are just as important.
What is sustainable investing?
You may have seen the terms ‘Sustainable Investment’ or ‘Socially Responsible investment’ (SRI). These are both ways of describing the criteria a professional Fund Manager will use in order to screen out or select the companies they invest in within the fund they manage.
In recent years, investors have increasingly been demanding that their money is invested in ways that reflect their values. As a result, there is a realisation that a large number of small investors can drive companies to take steps to improve the environment and make a positive impact on society. However, investors also want to see a positive return on their investment. Sustainable investing aims to achieve both of these things.
What does ESG stand for?
Many investment professionals talk about Environmental, Social and Governance (ESG) factors when selecting companies to invest in.
Examples of these factors are:
- Climate change
- Resource depletion
- Human rights
- Modern slavery
- Child labour
- Working conditions
- Employee relations
- Executive pay
- Board diversity & structure
- Political lobbying & donations
- Tax strategy
The disadvantages of ESG investing could mean that your investment may be less diversified, or produce lower returns compared to traditional investments
Building a Sustainable Future: Ethical Investment in Construction
More construction companies are moving towards providing a sustainable fund as the default option for their workplace pension schemes. This is part of their overall efforts to mitigate the impact their industry has on the environment, and in the hope that this will attract employees. Although, employers may be unaware of the enormous impact their investment choices can have on the environment. Investing pension funds into a sustainable, or ethical fund, could significantly reduce an individual’s impact on the environment.
A report finds that a pension worth £100,000 invested in a sustainable fund could be the equivalent of taking five or six cars off the road a year.The Financial Times (2021)
Construction companies are keen to attract investment from pension schemes, which can be a conflict of interest where a sustainable approach is being used. Thus, where a pension fund invests in physical property, they will usually aim to purchase high-quality premises which will deliver long-term returns to their clients. Above all, sustainable and ethical integration is key in determining which properties to buy and sell and minimising any negative impact on the local community and environment is crucial.
In conclusion, the construction industry plays a pivotal role in creating a sustainable future through ethical investment. A shift towards sustainable pension funds can significantly lessen environmental impact. Investors are driving this change by demanding their investments reflect their values. The integration of ESG factors in investment decisions further enhances this approach. Pension funds, while seeking long-term returns, are also prioritising the purchase of properties that minimize environmental and community impact. Particularly, this dual focus on financial success and sustainability is crucial in shaping a greener future for the construction industry.
A pension is a long-term investment. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested
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