Why SageWealth is the most sustainable provider in Europe

First: What is Sustainable Investing?

Sustainable investing focuses on the triple bottom line of people, planet, and profit. This is in contrast with the traditional way of business, where the only bottom line is profit.

Originally, sustainable investing was created by the financial industry for selfish reasons: to reduce their investment risks. As you can imagine, climate change threatens company profits and their continued existence. For example, climate change directly increases costs for insurers through flooding, fires, and droughts.

And we can see this in the data. A huge scientific analysis of 2000 papers showed that returns from sustainable investing are higher 60% of the time; and 90% of the studies show no worse returns compared to traditional investing.

For most of us, however, sustainable investing is about personal values. If you are against war, why invest in weapons companies?!

Sustainable investing is 27x times more impactful than sustainable consumption

Nordea looked at the C02 savings from sustainable investing (vs traditional investing), and was able to show that this was 27x more impactful than reducing your meat intake (to once per week); taking the train to work (vs car); or flying 40% less often!

Sustainable investing is 27x more impactful than lifestyle changes and a bar chart of the CO2 emissions per life style intervention

And this shouldn’t be very surprising. Corporations have a much bigger carbon footprint than individuals. Just 100 companies are responsible for 71% of global emissions. The majority of those companies are fossil fuel companies, such as Exxon and Shell, which are always part of traditional investment funds. Therefore by choosing to not invest in those companies we cut out the biggest sources of pollution globally.

We use the most sustainable ETFs on the market. How do we select them?

Our sustainability standard has three key components.

  1. First, we exclude the worst offenders. We strictly don’t invest in the following harmful industries: Conventional and controversial weapons, civilian firearms, nuclear weapons, tobacco, alcohol, animal agriculture, adult entertainment, gambling, GMOs, nuclear power, thermal coal and oil sands.
  2. Second, we look for particularly sustainable companies and bonds whose mission is to create a low-carbon future. In terms of bonds, we have included “Solactive’s Green Bonds” and “Sustainable Development Bonds”. These Bonds adhere to standards set by “The Climate Bonds Initiative’’, which promotes the rapid transition to a low carbon and climate resilient economy. In terms of stocks, we have included ETFs such as “Rize Sustainable Future of Food’’, ‘‘Rize Environmental Impact 100’’ and “FTSE EPRA Nareit Developed Green Blue’’ which are some of the most sustainable funds in the world. These funds invest in companies that are focused on providing solutions, so companies such as Oatly, Orsted, and Tesla are included.
  3. And third, for the neutral companies, such as those in the healthcare or technology sector we take a “best in class approach”. This means we only select the top 25% most sustainable companies and bonds in each industry, and only invest in those. This is not a ‘puritanical’ approach, given that some pollutants may still remain. However, if they do, it’s because they are the least polluting in their respective industry. And we believe it’s important to support them as they become more sustainable.

For the nerds: what this means in practice is that we exclusively invest in Article 8 and 9 funds (according to the EU’s new Sustainable Finance Disclosure Regulation).

Our sustainability standards are ‘simply’ stronger

Most wealth management companies in Europe only offer simple ESG or SRI investments. In practice, this means they exclude the worst offenders, such as coal and weapons. However, they don’t focus on the leaders and changemakers, so these investments usually don’t have a positive impact.

Here’s a chart to illustrate the difference:

we are pushing the frontier of sustainable investing

So typically wealth managers only offer 1 of 4 necessary ingredients to be truly sustainable

✔️ ESG (exclusion)
❌ Sustainable leaders (strict SRI, Paris climate aligned)
❌ Innovators in Sustainability (themes)
❌ Measure the carbon footprint of the investments

SageWealth considers sustainability holistically, so we can ensure that your investment has a positive impact long-term.

Our CO2 reduction in numbers

Unless you keep your money under a mattress, it will generate Co2. Why? Because banks are using your money to fund their own investments, and these are often not sustainable.

As such, money kept in an average bank account will produce 126t Co2 per Million USD.

Compared to this, an average global investment portfolio will produce 65t Co2 per Million USD.

And, due to the strong sustainability filters at SageWealth, we are able to push our numbers down to 46t CO2 per million USD.

In other words, keeping your money in a bank account produces 171% more Co2 than investing with us, and investing your money in traditional funds produces 41% more Co2.

Our portfolios are not perfect

It’s not easy to create an investment portfolio that balances good returns, affordability and flexibility. Compromises have to be made somewhere, but we are proud of what we achieved.

Think of us as having created a product that “kills 99% of germs” but not 100%.

Here are a few example companies inside SageWealth that we are not proud of:

  • Amazon (0.2% of our portfolios)
  • Goldman Sachs (0.48% of our portfolios)
  • Google (0.14% of our portfolios)

Why can’t we remove these companies?
It’s because we are operating with ETFs (they are incredibly cheap, flexible and great at diversifying your wealth), but they don’t allow you to pick each company inside them.

OK, but why don’t the ETF providers remove these companies?
Because these companies are often seen as being ‘neutral’ rather than harmful. They aren’t involved in ‘obviously’ harmful industries (e.g. weapons, fossil fuels) and have extremely low corruption scores. Further, in order to maintain good diversification, fund managers change the proportion of shares of neutral companies, rather than exclude them. For example, typically funds would allocate ~2% of Amazon shares. And we managed to get that down to 0.2%.

Final words

As it stands the global economy is not very sustainable, and in that context, we have done everything we can to ensure your investments are globally diversified, have strong returns and are as sustainable as possible.

If you have any questions about our sustainability standards, please message us at hello@sagewealth.eu