Since the pandemic hit in early 2021 and savers stashed their cash deposits in record amounts, the impact of negative interest rates and inflation on household savings have become a keenly debated topic.
In July, Irish household deposits hit a record €131.5 billion, a result of consumers withholding their cash as Covid-19 uncertainty and restrictions limited their spending.
In response, negative interest rates were introduced by banks to discourage account holders from hoarding their cash. In effect, holding on to that cash now actually costs account holders money.
When combined with the impact of inflation, the picture is grim: with Eurozone inflation reaching its highest level in June in nearly three years, it not only breached the European central bank’s target but rattled savers as well.
While you could be forgiven for thinking now is the time to splash your cash, given it is being eaten away by negative interest rates and inflation anyway, there are a number of savvy investment options that can help you turn your savings around and reap satisfying rewards.
In particular, investment funds with documented environmental, social and corporate governance (ESG) criteria are becoming increasingly popular for their notable market returns.
In fact, the Financial Times reported that those funds with higher ESG ratings in 2020 demonstrated better returns almost every month.
ESG is a component of corporate sustainability and when considered in the context of finance and investment, takes into account aspects such as
- climate change, greenhouse gas emissions, recycling practices, water usage, usage of renewable energy, raw material sourcing (Environmental)
- employee health and safety, fair wages, employee training and development, ethical supply chain sourcing, community relations, privacy and data security (Social) and
- board diversity, executive pay, business ethics, transparency, political contributions, company’s leadership, executive pay, audits, internal controls, and shareholder rights (Governance).
Taking ESG into account when investing is now timelier than ever considering the challenges the global population has faced throughout the pandemic, and those that will continue to challenge us, such as climate change, human rights and more.
There are now a variety of ESG solutions now available to the market. Cantor Fitzgerald for example recently launched its ESG 85% Progressive Protection Bond, designed to continuously protect 85% of the highest Net Asset Value ever achieved.
This bond is also an open-ended investment with daily liquidity and pricing, with no fixed investment term nor any entry or exit penalties, making it unmatched in the Irish market.
While offering an alternative, low risk investment strategy that helps protect your savings from being eaten away by rising inflation and negative interest rates, ESG funds are also future focused, giving altruists the peace-of-mind that what you invest today will also benefit the planet tomorrow.
To find out more about protecting the real value of your cash deposits and whether ESG investments are right for you, please get in touch with our team; give us a call today on 091 670 123 or email us at [email protected].