Sustainable funds, they're good for the planet and for your finances
Business leaders are increasingly conscious of the role they have to play across climate resilience, biodiversity and the circular economy. Photo: iStock
Sustainable investment is good for the planet. A necessary good. Something we need more of.
With the sustainable transition underway, there are increased investment opportunities to encompass not just financial returns, but also their positive social and environmental impacts.
In PwC’s latest Global Investor Survey, 63 per cent of global investors in Irish companies urge them to increase their investment to reduce carbon emissions.
Demand for increased sustainable investment was also key in BNP Paribas’ ESG Survey 2025, in which a vast majority of institutional investors ‘remained committed’ to sustainable investing, while moving towards more specific ESG-related investment themes to ensure both return and impact. The report showed a deepening involvement among private capital managers, who recognise the opportunities generated by low-carbon economies.
In Morgan Stanley’s ‘Sustainable Signals’ report, 77 per cent of individual investors globally expressed continued interest in investing in companies or funds that aim to achieve market-rate financial returns while also considering positive social and/or environmental impact.
According to the investment bank, close to 80 per cent believe it’s possible to balance market rate financial returns with a focus on sustainability, with the same percentage - when making a new investment - considering a company’s reporting on its carbon footprint and commitment to reducing greenhouse gas emissions.
Significantly, when asked what prevents investors from making sustainable investments, survey respondents cited a lack of transparency and trust in ESG data and the representation of potential investments as being more sustainable than they are.
Besides ‘greenwashing’ mistrust, other hurdles to maximum sustainable investment include persistent myths of a negative ilk. There’s the one that pretends that by its very nature sustainable investment leads to underperformance and lower returns. This is false. Morgan Stanley research shows that in the first half of this year, sustainable funds had a median return of 12.5 per cent, compared to 9.2 per cent for traditional funds. Also, that more than 80 per cent of global individual investors believe sustainable investments can achieve competitive market-rate returns.
Other sustainable investing myths such as ‘it doesn’t drive real change,’ and ‘it’s expensive and requires a large asset base,’ have been debunked by J.P. Morgan.
There would be more impact investing were it not for the fact that sometimes the truth about it falls prey to fake news. To misinformation, disinformation and lies. Sometimes by design. Sometimes for reasons of carelessness with the truth.
Whatever the reason, if it results in wannabe impact investors willy-nilly overlooking advice to consider the sustainable route, we all lose out, as will future generations.
To provide clarity, we invited Christina Kearney, senior financial advisor at Ethico to share truths and dispel misconceptions on the topic.
If you stood outside Tesco and asked 100 people if they would like to support fossil fuels, weapons manufacturers, or tobacco companies, nearly all of them would say “No.” Yet, if you asked the same group whether they know what their pension is invested in, most would admit they have no idea. That’s the root of the problem.
Across Ireland, the vast majority of pensions and investments still have significant exposure to harmful industries. Research shows that fossil fuel companies can make up 6–10 per cent of mainstream funds, with weapons and tobacco typically adding another 1–2 per cent. Think about it this way: If you had €100 in your wallet, would you really hand €12 to these industries? Yet that is effectively what happens every month through pension contributions and investments.
In total, Irish pension funds are worth around €140 billion. The way in which much of it is invested is a huge contradiction to Ireland’s climate goals and other social values. And this is happening with the savings of ordinary people who would probably prefer otherwise. While the scale of the negative consequences is significant, with the right advice it is possible to ensure your money provides a good pension for your retirement, while also improving the state of the world.
The term “ESG” (Environmental, Social, and Governance) might sound like jargon, but the core idea is simple. Instead of blindly funding every type of company, ESG investing aims to direct money in a way that does less harm and more good.
At Ethico, we are experts in ESG investing. Our philosophy includes removing the negative industries, which includes fossil fuels, weapons and tobacco companies. Add more positive impact companies: This involves doubling down on renewable energy, clean tech, healthcare, education and affordable housing. Improve the middle ground: This is about holding big companies accountable by voting as shareholders and pushing for better practices on: Environment (cutting carbon, switching to renewable power, reducing waste). Social issues (fair pay, worker rights, diversity, community investment). Governance (ethical leadership, no corruption, fair board structures).
This approach isn’t about being perfect. It’s about aligning investments with the world people want to retire into.
EU rules such as the Sustainable Finance Disclosure Regulation (SFDR) now require funds to classify themselves as Article 6 (not sustainable), Article 8 (light green), or Article 9 (dark green).
Greenwashing is still a risk. Many funds that are labelled as Article 8 are only marginally different from traditional ones. Working out which funds are genuinely sustainable is complex. A good financial advisor with expertise in the area can help guide you towards genuine, sustainable financial choices.
This is a common misconception. Many people assume sustainable investing means sacrificing returns. But evidence says otherwise: Meta-studies and performance comparisons show that ESG funds perform just as well as, and often better, than traditional funds. Fossil fuel companies in particular have consistently underperformed the global stock market for decades. And that’s before we start to price in the negative externalities to the wider business eco-system that can harm the rest of a portfolio in the long run.
There are well diversified sustainable indexes that track the same global markets as traditional funds, just with exclusions, so there’s no financial penalty for switching.
In fact, some would argue that fossil fuels are a long-term risk. As the world decarbonises, companies that refuse to change may see their business models collapse. Investing sustainably isn’t just an ethical choice, it could also be a better bet for your retirement.
Money talks. Where we invest shapes the world around us. It’s about starving the bad guys, so that when major pension funds divest, it becomes harder and more expensive for polluting or harmful companies to raise money. It’s about supercharging the good guys, so capital flows instead to renewables, healthcare, clean transport, and innovative solutions. It’s also about cutting carbon footprints as for many organisations, the carbon linked to their pension funds is larger than all their supply chain emissions combined. Switching funds can dramatically reduce this hidden footprint. Personal alignment is another factor. If you do your best to live a sustainable lifestyle, why let your pension quietly fund oil pipelines or weapons?
It’s a fact that of all the lifestyle changes recommended to reduce your carbon footprint, fixing your pension is one of the easiest.
The good news is switching is easier than most people think. The first step is to ask your provider the tough questions. Ask whether their fund invests in fossil fuels, weapons, or tobacco companies.Ask what exclusions are in place, how it measures positive impacts, how the carbon footprint of the fund compares with that of its peers. What exclusions are in place?
Then look for genuinely sustainable options. Know that while high-performing fossil-fuel-free funds do exist, often you need to choose them deliberately as they are rarely the default.
Get advice if needed. This is a specialist area and to do it well requires specific industry knowledge. ESG can be a minefield, and many “green” funds aren’t as green as they look. A good financial advisor can look under the bonnet and help you avoid greenwashing.
Push your employer. If you are in a company scheme, lobby for ESG options or for the default fund to be sustainable. Aligning corporate pension investments with company values can also protect brand reputation with all stakeholders.
The bottom line is that there is little point in saving into a pension for decades if it ends up funding a future of climate chaos. We all want a secure retirement. But we also want a healthy planet.
The good news is that we don’t have to choose between them. Sustainable investing lets us have both strong returns and a better world.
That leaves just one question to ask yourself: Do you know how “good” your pension really is?
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