Sustainable Investing 101

In this episode, Tamsin speaks to Gavin from Worthstone about sustainable investments. Ethical, green, ESG, impact are just some of the words used when people talk about this area of investing, but what really is it and how does it work?


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Gavin Francis

Gavin started working in financial services and alongside the advisory community in 1989. In 2010, he founded certified B Corp, Worthstone, which was the UK’s first targeted impact investment resource platform for Financial Advice professionals. In addition to co-authoring several ground-breaking reports, Gavin has participated in government working groups to help develop impact investing in the UK. He is the co-Founder of the Wellth Sustainable Investment Portfolios, a new MPS service for financial advisers.

Worthstone Brief History of Impact Investing video

Tamsin Caine

Tamsin is a Chartered Financial Planner with over 20 years experience. She works with couples and individuals who are at the end of a relationship and want agree how to divide their assets FAIRLY without a fight.

You can contact Tamsin at or arrange a free initial meeting using She is also part of the team running Facebook group Separation, Divorce and Dissolution UK

Tamsin Caine MSc., FPFS
Chartered Financial Planner
Smart Divorce Ltd
Smart Divorce

P.S. I am the co-author of “My Divorce Handbook – It’s What You Do Next That Counts”, written by divorce specialists and lawyers writing about their area of expertise to help walk you through the divorce process. You can buy it by scanning the QR code…

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(The transcript has been created by an AI, apologies for any mistakes)

Tamsin Caine 0:05
Today we’re going to be talking everything sustainable investing. So, really enjoyed understanding a bit more about the history of sustainable investing, and talking to Gavin Francis, who is an expert, and so incredibly passionate about this subject. So if you want to know how you can invest more sustainably, more impactfully, then do listen on. And please stick with us for that whole episode because it is well worth it, though. Let’s jump right in. Hello, and welcome to today’s episode of the Smart Divorce podcast. And today I’m joined by Gavin Francis from Worthstone, who is going to talk to all about investing sustainably. So we had a bit of a conversation before we clicked off this podcast about what I should call the blanket term of various types of investing in a greener way. And I’m reliably informed by Gavin that the current term for it is sustainable investing so before, we get into the conversation, welcome, Gavin, thank you for joining me today. Thank you. Would you like to tell everybody a little bit more about you your background? And and what makes you such an expert in this in this field?

Gavin Francis 1:32
Thank you, Tamsin. Well, firstly, thank you for inviting me to come on this podcast, I really appreciate that. And the opportunity to talk a bit more about sustainable investing, because that’s something I love talking about. And it’s something I know a little bit about. So I wouldn’t, I don’t like to call myself an expert. It’s something I’ve been doing for a long time. And it’s all I do. But I’ve got so much more to learn. And it’s such a progressive area, and it’s moving so quickly. And there’s so many intelligent and committed purposeful people in the air that you’re always learning, you know, and you’re picking stuff up all the time, which was, which is brilliant, I went to a conference earlier, we, we might touch on that. And there were some amazing people speaking, and you just feel like you can’t learn enough. You know, there’s always stuff to pick up. So yeah, but my background is actually in financial services. So I’ve worked in financial services for over 30 years now, wow. And more laterally in the last 15 years, it’s been purely focused on sustainable investing. And I work with businesses like yours. So we’re a business that we looked at all of the Sustainable funds are available in the market available to UK retail investors. And then we have a methodology to try and work out which of those funds are doing the things they say they’re doing on the label, and which are the ones that are the most sustainable, most impactful. And then we’ve worked so we scope the market, work out what’s in the market, then we rank the market. And then we rate those funds based on where we think they are, you know how sustainable we think they are. So that service isn’t available to the general public. It’s not a, b to c business. It’s not available to clients direct. It’s available to businesses like yours, who, who then use that analysis to decide or try and work out what funds match their clients objectives in this area. So that’s what we do. Fantastic.

Tamsin Caine 3:35
It’s a it’s a tricky old area, isn’t it?

Gavin Francis 3:38
It is I think, like I say, because it’s so progressive, and up until recently are up until the last couple of years, it was something that was seen as a little bit of a niche as well. So it was kind of tucked away in the corner. I think advisors were slightly frightened of it or are wary of it. And so they won’t necessarily mention it to clients unless they, you know, unless a client comes down and says, I really want to do this. It wasn’t something they sort of brought up of their own volition. Because in some ways they were they were maybe worried that they wouldn’t have a solution or wouldn’t know how to find the right solution. And that’s why we set up Worthstone was to try and make that easier for advisors so that they would talk more readily to clients because our, our ambition really is to just see more investors. I mean, we think that, you know, this will be investment, it won’t be differentiated between traditional investment and sustainable investment. In the next decade. I think we will see that the all investment will have to be sustainable investment because if you think about the next generation coming through, you think about our children and grandchildren I haven’t gotten to yet but I’m hoping to have some at some point, but you know, those next generations coming through, they that’s what they care about, you know, I have my daughter’s the Eco rep can’t remember the exact terminology they use at school, but she, you know, she presented it to her class and a class of elected her as the sustainable person, whatever that is, whatever sorry, terminology they use. But, yeah, they’re really passionate about this stuff. You know, they’re the ones that are keeping us on autos. And, and rightly so, because it’s, it’s the legacy that we leave that they’re going to have to pick up and run with. And at the moment, that’s not looking at a completely rosy picture. So we need to take our responsibility to do something about that.

Tamsin Caine 5:35
Yeah, absolutely. Right, as I can certainly see, I mean, more businesses have to think about their sustainable impact on the planet. And, and, and, and climate change, etc. So these are all things that arena, in our business heads anyway. So probably, it might not be a move necessarily to sustainable investing, but more of the move to businesses becoming sustainable, whatever they are. It’s so like you say, it will be it will, I can say that it will be kind of commonplace near, you know, it’s becoming much more commonplace, then, certainly, then the 20, something years ago that I started working in financial services, I think it’d be, it’d be a good idea to start off with the different names we have for this type of investing, and try and try and explain to people what the differences are, because I think some of the complication, as always, in financial services, is that we don’t necessarily understand or have a have a description for a meaning to the different types of investing. So I guess, for me, the kind of first sort of experience in in this type of investing will be an ethical investing would be like pure ethical investing. I was brought up as a Quaker. So my background would be the that, that any investment into arms into tobacco into pornography into alcohol into gambling, those would be no go investments, it within the religion that I come from. And I guess that’s where the kind of ethical investing part started. Would that would that be right in saying that?

Gavin Francis 7:33
I think you’re absolutely right, we’ve actually got a video and I’ll share that with you, Tamsin, which goes through the history, it’s just a three minute video, because we’ve tried to keep it short, but it goes through the history. And, you know, the Quaker movement, were right at the genesis of this movement originally, so, and it was all about exclusion. So it was like, you know, and it started from, you know, back in their roots, it was, you know, the catalyst for that was to was slavery. So they didn’t want to invest in businesses that had any exposure to anything. So it was to do with social actually, rather than environmental. And that’s another thing we can talk about the, you know, there’s a mix here of social and environmental. And actually, the two are so intertwined, because if you look in the developing world, you know, if we, with climate change, you know, the people that are going to be worst affected by that are the the poorest in our communities. So that two things are so interlinked, but sorry, coming back to your point, yes, you’re absolutely right. exclusionary, or what you exclude from your investment proposition was where it kind of originated.

Tamsin Caine 8:44
Yeah, absolutely. And I remember back in, you know, not that long ago, people saying, you know, I don’t want to invest in I think at the time it was, it would have been HSBC and Nestle, who were there were people who were very particularly wanted to exclude specific, not even specific kind of areas, but actually specific businesses that they that they didn’t want to invest in. And those were difficult to, it was difficult to find that without going down the fully discretionary route, you know, so that, that for me that that kind of would be the starting point and a guest that then became the kind of ESG funds, would that be fair to say?

Gavin Francis 9:31
You can map World History basically. So what’s happening in the world really impacts this area. So for example, like you said, when the Quakers started doing this stuff, it was back in actually, around the 1700s. It might have even been before the Quakers I can’t remember. There was the it was around the 1700s and it was related to slavery and things like that. And then as you go through history, and things become apparent To us, you know, we realised actually the stuff we’re doing is wrong. And it changed. And it’s changed the way in which this sustainable investing approaches has happened. So, you know, more latterly, you had in the 70s, you had some movements in the US, where people were saying to companies, like you can’t behave like this towards your workers, you know, so that’s where that sort of ESG started. Think the G, the E, S, and G. So it’s environmental, social and governance. So the 70s was where that governance type of stuff came in, where they were saying to, you know, it was the labour rights and the way people treated their employees in America, in Chicago, in the car manufacturing businesses and industrial businesses in Chicago, that so that was the G. The social is obviously the, you know, that the areas like you know, how people are treated people. And obviously, the E is environmental. So it’s like the planet, you know, how are we damaging the planet, and so that was coming about with the, I don’t know, remember, if you remember, there was this big oil spill. And again, that happened, I think that was sort of this 70s or 80s, even coming into the 90s, I can’t remember, but there was a big oil spill in because that Exxon Valdez, yeah. And then there was a big movement, again, from the from the US a big movement saying we can’t have this anymore, and it got all the institutional money, money, people together and said, We’ve got to put pressure on these companies to make sure this sort of thing doesn’t happen anymore. And that started a big movement there. So this was all swelling up and then and then, you know, became a global issue. And then you have things like the ESG, became a term actually through a report that was issued by the United Nations, that was in the 90s. And so then we had a kind of label for a specific label for it, and then you, you come into, into the 2000s. And you’ve got things like the sustainable development goals. So the SDGs, which is, you know, businesses talk about those big businesses, global businesses, and an investment houses are now talking about aiming at addressing the SDGs. And the Sustainable Development Goals is basically, in shorthand, a to do list of the most pressing challenges we have in the world, both environmental, and social. And there are 17 goals that are being aimed for by 2030. And we need billions of pounds of, you know, investment money aimed at these SDGs to, to alleviate these these problems otherwise, and that this is the big problem is that there’s a big cost to addressing all these issues, but the cost is far lower to us than the cost of not addressing them. So for example, climate change, you know, some really clever people have worked out what the cost of that is to us. But actually, the cost of not addressing it all the economists have worked out is 10 times more costly than than the cost that we would bear to actually try and address these issues. And that’s what people miss. Sometimes, I think, you know, the media sometimes like to criticise, you know, some of the some of the things that are being done to try and address the problems we’ve got. And they will point to the cost of doing that, and how it’s going to cost the taxpayer, you know, X amount to actually address these issues. But what they’re not saying is, if we don’t do it, what will the cost be to us, not just in monetary terms, but in terms of lifestyle, you know, if you’ve got a pension, and you retire in a world where the planet is melting, it’s not gonna be worth anything to us. So we’ve got to think about that.

Tamsin Caine 13:59
Absolutely. So we’ve got ESG funds, they started, as you say, becoming more and more of a of existence and commonplace. And then there was the development of impact funds. So talk to me about the difference between an ESG fund and an Impact Fund.

Gavin Francis 14:24
To me ESG is, is what what I would call an input. So it’s basically if you’re running a business, you’d be looking at your environmental footprint, you’d be looking at, you know, how you treat your workers, you’d be looking at all those sorts of things that you do as a business, in terms of how you run the business, so it’s operational, so it’s their inputs, whereas the an impact investment would be looking at What is that company producing? So what’s the product, what’s the goods or services, the output that that company is producing. So ESG is an input impact, I would say is an output. So you’d say, as an example, and Addie Das, everyone, most people heard of value Das. They are one of the most sustainable businesses, global businesses on the planet. So the stuff they do is, is, you know, in terms of their environmental footprint, their, their production, and manufacturing, etc. But, unfortunately, shell suits and trainers are not going to save our world. Whereas So, basically, that’s the sort of company that you would invest in through an ESG fund. Another example would be a company that produces you know, something really helpful for the planet. So it could be something like producing wins solar panels, or wind turbines or components that go towards something like a watch that helps to reduce or help people manage their diabetes as an example, you know, some sort of watch that tracks, you know, your blood sugar levels, etc. So that would be more of an impact. Yeah, because it’s, it’s focusing on the output, rather than the inputs. And where it gets confusing, is you could have a company, you know, in theory, let’s let’s go to the complete extremes. You could have a missile manufacturer, who are really sustainable, so they’re really good to their workers. And they really, you know, they, they, they’ve got a low environmental footprint in terms of the way they manufacture mission missiles. But obviously, you know, would you really want them and they could, in theory sitting in if you’re, if your fund is just about, we want the most highly rated ESG funds, in theory that that product that company share could sit inside an ESG fund. Whereas obviously, it wouldn’t sit in an Impact Fund. But on the other hand, going to the other extreme, you could have a, you know, a company that’s got a terrible environmental footprint. That is, manufacturing. Safe far is an example, there was a lot of criticism around some sort of paper manufacturing companies or cardboard manufacturing companies where the, the process uses a lot of water. So there was an argument that that was environmentally, you know, negligent or damaging, but the product itself, you know, recycled, cardboard packaging, actually is going to have a positive impact on the planet. So it’s about balancing up. And that’s why analysis on this stuff is so crucial, because it’s not, it’s not straightforward, you know, and it’s like anything in life, you know, you can look at for a superficial level, and that’s, that tends to be what happens in the media, and particularly social media, people are operating at a very superficial level. But you know, it’s, it’s really about looking below the surface and seeing what’s really happening. And that’s why clients need advisors like you. And advisors, like, you probably need someone like us to do some of that, digging in in the background. But there’s a new labelling system that’s coming in from the FCA, which is going to force product providers, so people who produce these funds to actually sit in one of these labels if they want to use a sustainable title. So Oh, three, four labels. This only came out yesterday. Actually, Tamsin so this is literally hot. Right on the money. Yeah, I’ll put a disclaimer out there that I haven’t read 200 pages in detail yet that the FCA put out a two o’clock yesterday afternoon. That was it. Sorry. No, it was the day before. But yeah, I’ve had 24 hours, but I still haven’t got through it. So there are full labels. I know this much. Sustainable improvers. And that’s why I talked about the overarching umbrella term being sustainable, sustainable improvers. Sustainable focus and sustainable impact. And then the fourth label is mixed motives. So as you can imagine, that’s like, you know, you agree three areas and then you mixed motives is a mix of of any of the three basically. So, would it be helpful just to tell you what the improvers focus on impact?

Tamsin Caine 19:59
Yeah, definitely. I mean, I’m I’m guessing that the improvers is kind of a almost a best of breed. You know, we’re we might be shell or we might be doing petrol and oil. But these are the things we’re doing to try and make ourselves more sustainable and more kindness to the planet. Am I on the right track?

Gavin Francis 20:19
You should work for the FCA.

Tamsin Caine 20:22
No, I shouldn’t.

Gavin Francis 20:25
Well, that’s perfect. Yeah, you’re exactly right. Well, this means that if the if you can guess what the labels mean, then that means they’re working so that you’ve got one out of one out of four. Brilliant.

Tamsin Caine 20:35
What was the next one? Focus,

Focus? Environmental was impact focus. Sustained sustainable, favourable focus. Okay. So that’s got to be that’s got to be your impact type of things, isn’t it? The people who were making wind turbines and solar panels,

Gavin Francis 20:56
You’ve got, you’ve got Improvers, Focus, and then we’ve actually got Impact as well. Okay,

Tamsin Caine 21:03
So those are gonna be Impact, aren’t they?

Speaker 1 21:06
Yeah. So so let me help you out with Focus. And I think this is a, you know, this is the one that’s slightly more tricky to understand. Focus is where you’d be investing in a business that has sustainable objectives. Clearly, you know, got sustainable objectives. But isn’t, isn’t necessarily producing a product or service, that where you could measure the impact of that. So, you know, it’d be less obvious, it wouldn’t be as much of an impact, there wouldn’t be as much intentionality around the impact as that as they would in the impact label. So yeah, that’s, that’s slightly, you know, it will be the sustainable businesses, I think would fit into that. So something like an added gas maybe,

Tamsin Caine 22:01
right. Okay. Got it. Yeah, that makes sense.

Speaker 1 22:02
And you’re right about the Improvers. The Improvers is where you’ve got a company who, because there’s a big argument about should you disinvest, from companies, or should you be working with them to improve? Now, this is getting a little bit technical, because if you think about it, when you buy these funds, when they buy a stock, or they buy a share in a company, it’s on a secondary market. So you buy and sell on a secondary market, if you don’t buy the share, someone else buys it. So it’s not like by by not buying it, or by disinvesting. You’re not really, you’re not really doing very much. And in some ways, I heard a great analogy about this the other day, it’s a bit like, we all take our rubbish out, don’t we on a particular day, I don’t know what your day is my day’s, Monday evening, right? I get home. And my wife reminds me, this is my job, right? My wife reminds me I’ve got put the rubbish out. Okay, so I’ll kill the bags, and I take them out. And I put them in the various, we’ve got three bins, a blue bin, a green bin, and a black bin, and the and the food waste bin. So I get the bags, and I put them in the bins. But disinvesting from a company that is, is harmful to the you know, to people or planet, it’s a bit like taking your rubbish out and putting it in your neighbor’s bins.

Tamsin Caine 23:27
Okay, like going.. Yeah, give me more.

Speaker 1 23:31
So basically, what people are saying is what we should do, rather than chucking the rubbish out. And, you know, giving it to you, letting someone else buy it. What we should do is own those companies, but engage with them, to try and get them to do things better. So, you know, work with those companies to improve their, you know, the way they treat their employees, to work with those companies to make sure that they don’t have slavery within their supply chains to remove, you know, modern slavery from their supply chains, to work with those companies to improve their environmental footprint. So that that’s what an Improvers is, is, is basically, you will have a mixed bag of companies in there. And they might be doing some really not very nice things at the moment. But the idea is, is that the asset manager engages with them. And because they own the shares or some of the shares, they can they have a vote at their shareholder meeting, and they could vote against, you know, things that they know are going to be detrimental to, you know, people or planet. So that’s the idea of improvers, which is obviously very different to the other end of the spectrum, which is the impact and which is where you know, you’ve got companies producing things that are going to help hopefully achieve the SDGs at some point in the future.

Tamsin Caine 25:02
Okay, all that makes that makes some sense in it, it’s good that the FCA are starting to think about labelling these funds, because it might make it a little bit easier to figure out what’s in what. And one of the things that struck me over the last, however long that I’ve kind of started looking into these into these funds is particularly, and this may not be the case now, but I think it is that there was always kind of a 10% gap in particularly in ESG funds, where the fund manager could have 10% of the fund, that wasn’t necessarily, under all the guidance that the rest of the assets needed to be under 10%. Sounds like quite a lot to me. And I kinda, I wondered what A is that still the case? And be? How does that sit with you? Because it didn’t sit? Well with me, if I was hoping to be investing in an ESG in a sustainable fund, I don’t really want to think that 10% of it could be doing whatever the fund manager liked.

Gavin Francis 26:10
Yeah. I mean, I call this you know, I don’t own the term, it wasn’t I got this from someone else. I learned a lot from other people. Basically, I don’t come up with anything original. It’s all things like gathering mail do that. Yeah. Yeah, I call it the Get Out of Jail Free card. So you know, it’s like, when you playing Monopoly, or whatever it is, and you’ve, you’ve got that card in your pack, haven’t you. And as soon as you get caught, you basically play play the Get Out of Jail Free card, and that’s like, Oh, you didn’t see the small print, it’s, we can hold 10% of that rubbish. You know, that’s allowed in this, but you didn’t read the small print. And that’s because it was like, you know, this sort of minute in the back of the document somewhere. But I think that’s annoying. And, you know, you’d hope that people don’t abuse that, but I can see why asset managers need to reserve some right for some flexibility, you know, in adverse market conditions, they may feel like they have, you know, they need some sort of mechanism by which they can, you know, minimise volatility or, you know, minimise a downside risk in, in certain areas, and they, they would need to fly to some sort of, yeah, mechanism, you know, financial instrument that just would not qualify, but, but, but provides them with a volatility dampener of some sort. So, I think, I think, you know, if I’m being if I get off my, my, my box preaching at Hyde Park corner, and sort of look at it from a real world perspective, you know, at the end of the day, for all your clients and for most investors, ultimately, they, they are, they are savers, and they and this money is being saved for, you know, their retirement or for some purpose that they have, whether it’s, you know, their children or grandchildren or school fee, or whatever it might be. So we can’t throw the baby out with the bathwater, you know, there’s still a financial objective to this. That’s why they’re saving rather than than giving the money away. So those asset managers don’t listen to this, because it’s, it’s just reinforcing that they shouldn’t be doing this. But, you know, I do I do think this is, is something we need to keep an eye on. Yeah. Because, you know, it’s, I can understand why it’s there. And I can see why, in circumstances where you could justify using it. But it is, it is slightly galling, if you find that they are kind of invested in certain things, which they shouldn’t, you know, ideally wouldn’t be, and it’s, you know, and it’s not at a time where there’s extreme volatility or some financial reason for doing that. So, again, you know, that’s why people like us are crawling all over this stuff all the time, because we, we have to hold asset managers accountable. You know, it’s the way the free market works. If you leave people to just do what they want, then there will be mission creep, you need the different areas, you need the different actors in the market, so to keep it working well together for everyone to meet the objectives that everyone has. And it’s that tension in the market where different players, you know, play different roles, which actually makes it work. And I think I’d love to see times in a time where we can all collaborate and work together rather than kind of being an asset And then but and that’s what we’re trying to do now is bring all the stakeholders together, you know, bring advisors, bring clients, bring asset managers, and say, look, we’ve all really got the same objective here, let’s try and let’s be pragmatic, because you know, there are, you know, we can’t purists there, I always say, I think this was me, I don’t think I make this from anyone else. But there’s no such thing as a perfect investment. It just doesn’t exist. If you look deeply enough into all of these things, even the really ethical funds and all the rest of it, there will be some little speck in there, that, you know, that exists. And I often start will not often, but I sometimes sort of think about this for, you know, I know, this is, this is a bit unethical. But diamonds, you know, you’ve got diamonds have got, they’re very, very few pure diamonds, you know, they’ve all got some sort of inclusion in them, or slightly odd colour or whatever. And that’s exactly the same as investments, there will be something somewhere, you know, and if you get your eyeglass out and you really look at it, they’ll there’ll be something, but it’s, it’s about managing that and managing those expectations of clients and saying, and that’s what we do, we say, look, there’s a whole load of exclusions here, they ideally wouldn’t be invested in any of this. But unfortunately, there are small specks in these places, because we’ve looked right through their supply chain. You know, we don’t just look at what the company does. Who owns that company? You know, what are the corporation owns that company? And what are they doing? Or, you know, what about them, they might be only producing cardboard boxes, but actually, those cardboard boxes are being used to package up grenades that are sent, you know, so there’s always something and it’s about understanding, knowing what they are, and then making a decision yourself as to actually, I’m okay with that. I understand why that’s there. Or saying, No, I don’t agree with that. I don’t want that at all. And then you make it, then you’re able to make a decision, isn’t it? So it’s providing the information so that people are empowered to make those decisions? And that’s, that’s, that’s the reality, because there isn’t anything pure out there.

Tamsin Caine 32:07
Fair enough. Okay. I’m gonna play devil’s advocate for a few minutes, because I’ve got two questions to ask you that? They’re probably I don’t know, their arguments for not doing this, I guess. So. So the first one is, is cost. So it tends to cost more to invest in a sustainable way. So what’s if I if my aim, is to increase my retirement pot, that’s why I’m investing rather than putting the money in the bank or into the bed, if it’s going to cost me more than to get the same level of return of God to note that the returns are going to have to be better because the costs are higher. Is that realistic? Or is there are another argument fair? Even though the costs are higher, which you should still do it?

Gavin Francis 33:04
That there are loads? That’s, that’s a really good question. And it’s very practical, and it’s very real, you know, because ultimately, we, you know, we look at what we’re doing, and we look at whatever we’re doing, when we buy something, we always want to get best value, don’t we? We don’t want to pay more for something than you should pay. But I think we’ve got to broaden out this conversation, right? Because I think this is urgent. Okay, this is this isn’t we’re not messing about here. This is urgent. We’ve all seen that. It’s very hard to find people who are still denying climate change. There are a lot of people still do it doing it. But you just got to experience the last few summers we’ve had the weight, the you know, the events with the weather events we’re seeing around the world, etc. So I think I want to, I want to zoom out a little bit and say, you know, basically, it’s cheaper to save the planet to this than to destroy the planet. Yeah. And, and we will get to keep our lovely home, because we’ve got to think not just for ourselves, but what about the next generations? You know, what about the future generations? And this is real DNA. I’m not trying to make this stuff up. This is this is this is what government are talking about? Cop 28 is starting. I think it might be starting today or it’s it’s on the horizon. Yeah, this is what people are going to be discussing. Yeah, there is. There is real urgency. Now, if we don’t sort this out, very, very soon, there will be no turning back and we will see a very, you know, steep decline. So I get what people say when they say about price, and we look at that, but sometimes we’re not. We need to zoom out a bit and look at the big picture. Because we all have a responsibility. We all have a responsibility. And it might cost us something to take action and to do that. So by investing in these type of funds, generally speaking, the more impactful funds are going to be what’s known as active managed funds. So I know you know that term soon. But I don’t know whether or not you’re the people that listen to this podcast will understand the difference between active and passive listening with explaining that, do you want to explain it or shall I?

Tamsin Caine 35:29
I’ll leave that one with you.

Gavin Francis 35:32
Okay, oh, let me active management is basically where a fund manager is specifically going out and picking specific funds to include in their in their funds, or sorry, specific holdings, equities or bonds to put into their, into their funds. So that’s an active managed fund, a passive managed fund. And you might have to correct me times if I get this slightly wrong, but basically, it’s where you take an exposure to the hole of market. So you, you try to get as many constituents from a particular market that you’re investing in. So if you’re investing in the UK, you’re basically trying to get as bigger spread of the UK companies available to invest in as you can, and hold that in your fund. So you’re not really deciding whether you like that company A or that company B and I’ll buy that one. Rather than that one, you’re actually saying, I’ll have a bit of everything, because you want to represent the market. So that’s passive investing. And that can be done really cheaply. So a very low cost passive investing, whereas active management tends to have a higher cost, because you’ve got arguably more in more involvement by the asset manager, measuring buying and selling because these are active these sorry, these are impact funds. So you need to really understand, really know those companies inside out what are the companies it’s so there’s a, there’s a higher cost to that. And that is then passed on through the asset management charge, sorry, through the annual management charge of the fund to the investor. So I’d say give you a ballpark figure of the difference in cost. I reckon an equity fund and actively managed equity fund Impact Fund will be around 80 basis points. So point 8%. And, you know, what’s the passive fun now, less than 20.2 is less than point two. So that’s the difference you’re talking about, you know, possibly as much as point six, five difference per annum, which, obviously, compounding Could, could be quite a lot of money, you know, and, and the other thing is, is not just the cost, it’s the volatility, isn’t it. So, in theory, a passive fund doesn’t move up and down as much, whereas an active fund could be more susceptible to tail winds or headwind so they could shoot ahead, you know, quite quickly and grow quite quickly, but they can also fall quite quickly. So, so that’s quite a difference. You know, it’s, it’s the behaviour of the firm that’s slightly different. So it might be more volatile. And it also might be more expensive in terms of annual management costs. But like I say, it’s really a values decision. It’s like, okay, this might be costing me a little bit more, or, or it might cost me a lot more, I don’t know, you’d need to look at the numbers. But actually, you know, what is the risk of not investing in this way? And I think one of the things that’s going to change over the next 10 years, and this is something I heard Sir Alec Sharma say two days ago, I was at a conference he was speaking at. He’s the representative of the government who’s going to cop 28. And my question was asked of him, if there was one thing that you would want to see change in the world, what would it be? And he said, Please, price climate risk into everything you do. So what that means is, what’s not happening at the moment is there is no price for climate risks. So if if a company is producing barrels of oil, and that’s going to we know that there’s a scientific proof to say that that is going to damage the planet, that risk is not being priced into the into the price of their stock. Okay, that is going to happen. And when that happens, you’re going to have loads of assets that are held in these traditional funds, which is suddenly going to potentially no one’s going to want to buy because the climate risk will have been priced in and it will remove value From those funds, and that’s going to happen, I don’t know if that will happen suddenly, or whether that will happen over time. But, you know, those are things that we have to factor in. So if you just look at price, you might be just looking at too, too small and area, and you not might need to start to broaden out your thinking about whether it’s just price that is actually going to impact on your overall, you know, the end story, basically. Sorry, that was a bit of a long winded answer.

Tamsin Caine 40:32
So, alright, so good. You won’t believe this. But we’ve actually come to the essence of our time together. Is there anything that you want to say to, to wrap up anything you want to add to what you’ve said already?

Gavin Francis 40:47
I think the only thing I would say is that, well, firstly, if you’ve got to the this point in the, in the podcasts, and you’ve stayed with us, thank you, thank you for listening. That is, I would like to say, I hope that what I’ve said does make some sense, you know, to people, and, you know, I am very passionate about this subject. And I do think that, you know, by investing in this way, we’re doing what’s right, not only for us, but for, you know, the the rest of the community around us, and potentially future communities that come along. And I also would just like to say that, you know, the cost of inaction is far greater than the cost of, you know, climate change that that will result. And there is a stat that says that 300% of GDP by the end of the century will be destroyed by climate change. So, you know, there is a cost to not doing anything and and I think we need to think deeply about that. But, but do you know, if you’re listening to this, do speak to terms in do speak to your financial planner, about these things, and just have the debate, you know, just cut even if you don’t want to do anything now, just keep keep an open mind. And keep thinking and talking about it. And I hope, I hope you know, that’s, that’s something that’s of interest.

Tamsin Caine 42:24
Absolutely. Thank you. And we’ll put up the video that you mentioned earlier in the show notes. So if anybody wants to watch that they can do. That was absolutely brilliant! I massively appreciated your time Gavin. I mean, thank you so much that was there. It’s very clear how incredibly passionate you are about this subject. And hopefully that’s opened a few eyes of the of our listeners today as well. So many thanks for joining me.

I hope you enjoyed the episode of the Smart Divorce podcast. If you would like to get in touch please have a look in the show notes for our details or go onto the website Also if you are listening on Apple podcasts or on Spotify and you wouldn’t mind leaving us a lovely five star review. That would be fantastic. I know that lots of our listeners are finding this is incredibly helpful in their journey through separation divorce and dissolving a civil partnership. Also, if you would like some further support, we do have Facebook group now. It’s called ‘Separation divorce and dissolution UK.’ Please do go on to Facebook, search up the group and we’d be delighted to have you join us. The one thing I would say is do please answer their membership questions. Okay, have a great day and take care!


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