Today’s financial investors and traders that seek long and short-term profits are increasingly aware of the carbon footprint of the companies they invest in. With climate change now widely acknowledged and businesses across all sectors ramping up their efforts to operate with a greater responsibility towards the wider environment, ethical trading has become an exciting opportunity for eco-conscious individuals.
It is said that up to €120 billion was invested in sustainable investment options during 2019. Much of that will have been invested in binary options trading, as more retail traders are looking to speculate on stocks with fixed risks and rewards, acting as an entry-level form of trading for beginners, thanks to the low minimum trade prices and the hundreds of assets available to trade with reputable brokers. If you are looking to redefine your investment portfolio and incorporate a more sustainable and ethical approach to investing in the future for you and the planet, read on as we recommend five ethical trading trends that are likely to be hot topics throughout 2021.
Capitalisation of shifting consumer ethics
In the UK alone, ethical consumer spending and finance in 2019 peaked at £98 billion. This shift in consumer attitudes towards ethical goods and services is fuelled by two key issues – climate change and public health. Retailers are working hard to improve their sustainability, while consumers are changing their approach to things like their diet in a bid to improve their physical and mental wellbeing. McDonald’s is a global fast-food giant with a keen eye on veganism. In fact, their proposed ‘McPlant’ food menu is due to drop in 2021 which could catapult the McDonald’s share price. Unilever is another stock worth monitoring given that they are supplying Burger King with their own plant-based fast-food menu in 2021.
The concept of green bonds
In a bid to accelerate the transition towards a low-carbon, sustainable global economy, many of the world’s biggest stock exchanges have introduced certified green bonds. The London Stock Exchange was one of the first to champion an exclusive Sustainable Bond Market (SBM). The proceeds of green bonds are used to finance major projects with green benefits. $200 billion worth of green bonds were issued last year, and the UK government is also set to issue its inaugural sovereign green bond in the coming months.
Renewables Vs coal
The previous governor of the Bank of England, Mark Carney, once labelled the fight for a carbon-neutral world as the “greatest commercial opportunity” of our time. In the next four-to-five years, the International Energy Agency (IEA) forecasts that the majority of electricity supplies worldwide will be powered by renewables rather than coal. Oil powerhouses like Orsted transitioned towards a renewable future a decade ago, leaving giants like BP and Royal Dutch Shell trailing in their wake. It will be intriguing to see which opportunities present themselves in the renewables sector, including the electric vehicle (EV) industry and its bid for mainstream adoption. There are tell-tale signs when a business is developing a sustainable energy business model, not least internal efficiencies and new technologies.
Corporate diversity at boardroom level
Following the Parker Review in 2017, it was revealed that over half of the companies listed in the FTSE 100 index lacked directors from ethnic minorities. The review encouraged corporations to appoint one by the end of 2021, so the clock is ticking. Investing in forward-thinking, agile stocks that are embracing ethnic and gender diversity should be part of any ethical trading strategy in 2021. More than a third of members on the board of FTSE 100 companies are now female, with Citibank becoming the first leading global bank to appoint a woman as chief executive in Jane Fraser. Investors should also note that McKinsey’s survey of 1,000-plus corporations in over a dozen countries found that firms with gender and ethnic diversity on their boards are likely to experience above-average profitability in the coming years.
Last but by no means least, societal investing should also be considered as an ethical trading strategy. Investing in stocks and businesses with bold ambitions for positive societal change should be prioritised. These changes could include projects relating to health and social care and affordable housing. The size of the market for social impact investments in the UK alone is expected to be worth at least £10 billion in four years.
There is no doubt that climate change will reset the trading landscape in the decades ahead, as investors scramble to revise their portfolios in an opportunist fashion as opposed to a long-term threat to their returns.