This week is good money week. Like many well meaning initiatives, it is often hijacked by corporate institutions wanting to appear like they are making a positive impact, regardless of their actions the other 51 weeks a year.
Regardless, the concept of promoting responsible finance is good – and much needed. However, what is meant by ‘good money’ is up to interpretation.
On its website, Good Money Week says its aim is to bring together different sectors of the UK finance industry to consider how they can “help the public make better choices with their pensions, savings and investments, and better understand the positive impact they can have on the environment and wider society when it comes to their financial decisions.”
But what counts as a better choice? And can money really be described as good or bad? Or is money simply a tool to fund good or bad actions?
Simply put, £100 is £100 wherever it came from or however it is earnt. That is not to say, obtaining money under illegal circumstances should be condoned at all.
Wealth managers look after clients who have gained their money in a wide range of ways.
However they did this, once a client has certain funds – providing they have passed AML checks, KYC checks, and the like – it is what they do with their money that really counts.
Choosing to invest responsibly and make a positive impact with those funds is what Good Money Week aims to promote.
However, one of the fundamental issues with responsible investing is that it encompasses such a broad range of areas and can mean two completely different things to two people.
For example, one person may consider a tobacco factory running a programme to employ disadvantaged women is a good impact investment. Another may say investing in a tobacco factory can never be an ESG investment.
This is of course an extreme example.
In reality, most investment opportunities fall into a ‘grey’ area. Very few are either completely good or bad.
The worry is that describing money as 'good' risks greenwashing and closing down important conversations.
It is widely accepted there is a significant issue with many green-labelled funds.
Not only is this a waste of money that could be used to make a positive difference, it also risks disillusioning clients.
If clients begin to believe that ‘good’ investments barely differ from more traditional investments, they are likely to move away from impact.
These problems can be overcome. Although it is very unlikely one firm can do it alone.
The wealth management industry must work collectively to ensure its messaging is clear and consistent and suitable products and portfolios are available to suit a range of client preferences.
There is no one right way to make money ‘good’. But, the industry needs to be more consistent in what could constitute ‘good’ investing.
Regardless of the potential pitfalls, initiatives like Good Money Week gaining traction can only be a positive, if only for starting the conversation.
Progress cannot be made by heads being stuck in the sand. Difficult conversations must be had in order to drive the wealth management industry forward.
