'How ordinary investors and institutions alike can help fight climate change'

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This week sees the conclusion of the UN's top climate conference, COP26, working towards a comprehensive agreement on the greatest threat to the world today. The central pillar to the global agreements underpinning the conference is aspirational: to mobilize climate finance by harnessing both public and private finance to provide the funding they need to prevent and mitigate the impacts of climate change. The message could not be clearer to every financial decision that needs to take climate into account.

Since the last major COP meeting, we've seen a seismic shift towards the rise of ESG investing. Companies and financial products are now rated according to their records on the environment, treatment of workers, and governance standards. More and more investments are linked to recognized ESG criteria as the market expresses its preference for sustainable businesses, with global ESG assets on track to exceed 53 trillion USD by 2025, a third of all managed assets globally. It's an encouraging sign of efficient markets facilitating sustainable capitalism, catering to the wide variety of sustainable causes individual investors care about.

This trend largely predates the uptick in the growing democratization of trading platforms, but it was born out of ordinary savers and investors' desires to see companies held to account for their sustainability practices. However, traditional ESG investments typically rely on a fund manager or other financial professional to use their judgment on which stocks or investments best fit their ESG portfolio or product. Under this model, retail traders are disenfranchised and have to rely on choices made by fund managers with privileged access to ESG data rather than making their own decisions. This speaks to a larger disparity between the largest few and the many small investors, making 'going green' a privilege of the wealthy and powerful.

Democratizing markets through greater participation will only make them more efficient, and this can only be a boon for ESG investing. We believe that everyone should be able to select ESG investments, cheaply and conveniently. Climate-related innovation is a natural extension of platforms such as ours, which work to break down traditional barriers to investing by granting our users the primary data they need to make up their own minds.

Linked with strategic partnerships like the London Stock Exchange's market data provider Refinitiv and built with the promise in mind to disrupt markets, we have cut out the middleman and the expensive fees fund managers charge for ESG overlays. Our trading platform feeds this data directly from Refinitiv, meaning that investors have access to all of this information at their fingertips the moment they need to make an investment decision. . On the back of our success so far, we hope to set a precedent for trading platforms to empower everyone to make climate change a priority through financial participation.

This is because there is no single type of ESG investor. For example, many investors might care deeply about a company's approach to carbon emissions but be less interested in its overall governance structure. Some companies can score very highly in ESG indexes for reasons which have nothing to do with the individual preferences of investors – a green energy company might be of little interest to an investor who cares about investing in companies which employ women in senior positions. When social and environmental issues come into play, the more voices we have in the market, the more efficient that market will be. That's what we mean by democratisation.

We've already seen how this works in practice. Tesla Inc has been a perennially popular stock across trading platforms, greater participation in the stock market has brought the company new investors and boosted its stock price. Traditional petrol-fuelled vehicle manufacturers across the globe have taken notice and invested in their own electric vehicle divisions. Emboldened by this shift, policymakers are looking to bring forward the end of petrol-fuelled passenger transport. Democratized markets have helped speed the progress of electric cars, from a niche pursuit to a mainstream fact of life and an issue near the top of the policy agenda for COP delegates.

We founded Currency.com and Capital.com with a vision to democratize finance, to make it easier for ordinary people to invest and have a say in choices that shape their world. Our approach is centered on making as much information and support available to them so that they can come to their own informed investment decisions. We hope to empower people through financial markets, giving them a stake in their financial future, and perhaps even the future of the planet.

This article was first published on November 12, 2021