A Guide And A Case Study For Investing With Integrity
Aaron Damiano Sparkes is the founder and CEO of Whisky 1901, a leading Scotch whisky investment company headquartered in London.
As consumer awareness of environmental and societal issues grows, so too does demand for goods and services that address these.
In fact, research has found that 80% of consumers are willing to pay more for sustainably produced or sourced goods, with over half of consumers stating that they are buying more sustainable products to reduce their impact on the environment. In addition, a third of consumers state their trust in brands would improve if they were recognized as an ethical and sustainable provider.
As such, spurred on by buyer behaviors, many industries are making a conscious effort to demonstrate responsible and ethical business practices.
The Ethics Of Investing
When it comes to financial services—stocks and shares, for example—many investors are keen to ensure their investment portfolio is not only profitable but aligns with their personal values. As consumers’ collective conscience grows, some traditional investment funds, such as pensions, have come under scrutiny regarding their holdings in certain sectors, such as oil and gas companies.
Previously, responsible and ethical investments were perceived to be a niche market, but this is no longer the case. A recent report highlighted that 77% of investors globally are interested in investing in companies or funds that aim to achieve not only market-rate financial returns but ones that also consider positive social or environmental impacts. Also, 57% of investors said that their interest had increased in the last two years. And this growth is only expected to grow. In the U.K. alone, the market for socially responsible investing is predicted to increase by 173%, reaching £48 billion by 2027.
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Ethical Investment In Alternatives: Whisky As A Case Study
Investors’ desire to make more ethical investments is not limited to traditional investments, either; it applies to the growing alternative investment market, which includes the likes of whisky, fine wine and luxury goods.
My company is a Scotch whisky investment company. Let’s consider the Scotch whisky industry as a case study throughout this article. The industry contributed £7.1 billion to the U.K. economy in 2022, employs and/or supports the jobs of 66,000 people in the U.K. and is the U.K.’s biggest food and drink export.
Given the above, and as a major manufacturer, the sector has a duty to tackle the climate crisis across all areas where production and distribution have an impact. With the launch of its Sustainability Strategy, the Scottish Whisky Association has committed to reaching net zero by 2040, a full decade earlier than the U.K. as a whole. This includes moving to a circular economy where reusable, recyclable or compostable packaging is one of the main areas of focus, using water responsibly and caring for the land to minimize and reduce the impact of farming. Notably, the sector has already cut greenhouse gas emissions by more than 50% since 2008.
As a cask investment broker, my company works with distilleries such as Bruichladdich, Bunnahabhain and Deanston, who are working to implement several sustainable practices.
Bruichladdich Distillery recently announced its aim to decarbonize all distilling operations by 2025. As one of the largest private employers on the Isle of Islay, the distillery supports and promotes the local community. Similarly, Bunnahabhain Distillery is also on track to become one of the first distilleries on the Isle of Islay to have a net-zero emission distillation process, having installed a biomass energy center to support the island’s forests and economy with a locally sourced fueling system. Known for its organic whisky, Deanston Distillery was the first hydroelectric, self-sufficient distillery in Scotland, receiving a gold certification from the Green Tourism accreditation body for its sustainability practices.
While some investors may have concerns about supporting alcohol brands—for example, due to health concerns and the social impact of overconsumption—there has been a significant shift in the industry to promote responsible consumption and to positively contribute to communities through education initiatives. Ultimately, investors need to weigh any cons along with the pros.
Sustainable initiatives appeal to a growing number of consumers striving to be more ethically conscious in their purchases. By implementing green credentials in their distilling operations, product packaging and shipments and even in tourism, the Scotch whisky industry is giving back to its local and regional communities too. And, while the cask whisky investment market is a relatively new, albeit growing industry, these environmental, social and governance (ESG) initiatives only make it a more attractive alternative investment opportunity.
Ethics Versus Profitability
The market for whisky investments has seen dramatic growth in recent years, with global whisky sales on track to reach $127.53 billion by 2028. These ethical and sustainable investments are becoming increasingly popular and an attractive choice for ethically conscious investors.
Prioritizing ethics doesn’t mean compromising on financial returns. In fact, ethical investments are relatively resilient when compared to traditional investments that are impacted by industry uncertainty and geo-economical events. Historically, socially responsible investments have demonstrated a remarkable capacity to weather market fluctuations. Indeed, ethical investments outperformed traditional funds in the first half of 2023.
So, by gradually shifting to a more ethical and responsible investment portfolio strategy, investors can help make a meaningful social and environmental impact, while also reaping the financial returns of an investment.
How To Approach Ethical Investments
One approach to investing that is gaining momentum is socially responsible investing (SRI). This strategy involves considering if an industry or company is having a positive social impact on the community and choosing investments that align with personal values or avoiding those that don’t. By incorporating ESG factors into financial decisions, investors can ensure that they support businesses that are committed to ethical governance and social responsibility while also generating positive returns.
When beginning any investment journey, investors must consider several factors, including their personal budget, financial goals and appetite for risk, as well as social and ethical impact. When it comes to alternative investments such as fine wine or whisky, investors should check that any advisor or broker they engage works with only the best wineries and distilleries that have robust and clear ESG policies in place.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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