For the next instalment of our YS,X interview series we spoke to Josh Gregory, founder of the newly launched green investments platform, Sugi. Aimed at retail investors, Sugi is the first platform in the UK allowing users to check the carbon impact of their investments and compare with industry benchmarks to help them build a greener portfolio that is in line with their values.
Over the course of our conversation, we delved into the environmental impact of traditional investment portfolios, the drawbacks of ESG ratings and the dangers of greenwashing within the green investments sector.
What motivated you to launch Sugi?
Before Sugi, I worked in conservation finance, working with global green finance organisations and advising them on how to get the private sector to invest in sustainable development.
I noticed that the focus was on institutional investors and development banks. No one was thinking about everyday investors so we needed a change of behaviour across the board to make a real difference.
I believe that everyday investors hold tremendous power and can be a catalyst for positive change. If investors know what’s really going on behind the scenes with their investments, then they can send a message to big corporations to do better. That’s why I started Sugi.
How have investments historically impacted the environment?
Historically, investment portfolios have focused purely on financial gains. Often, this has been at the expense of the environment, for example, financing fossil fuels and mining.
The good news is that, increasingly, both institutional and retail investors want to see their investments having a positive social and environmental effect, in addition to financial gains. This can be hard to ascertain as many investors don’t actually know where their money is going. That’s where Sugi comes in.
How does Sugi’s technology aim to make green investments more straightforward for retail investors?
Our app gives users reliable and objective data about the impact of their investments.
We show users the carbon impact of their individual investments and their overall portfolios in clear and simple terms – annual tonnes / kilograms of emissions and how this equates to a number of trees lost. We also provide industry benchmarks and data for similar investments, so users can see how their investments compare.
Providing context is key. This helps users understand their impact and make greener decisions when managing their portfolios.
We’ve started with carbon impact data as this is the most familiar metric for most people, but we’re rolling out additional metrics very soon. In fact, we have a big announcement coming up about a new metric that will be another first for UK retail investors. It’s in the final stages of development and we’ll be releasing it to our beta users in March.
What are the drawbacks of traditional ESG ratings, and how does Sugi overcome these?
ESG ratings (environmental, social and governance) are designed for institutional investors, which has implications on retail investors. The ratings are designed to be used in tandem with other data – typically sophisticated portfolio dashboards – that are used to help build portfolios.
They’re also a financial risk metric. This means that they look at a company in the context of ESG factors and analyse how likely it is to perform as a result. This is important, but most retail investors want to invest for the good of the planet now and want information that helps them do that.
Both of these points aside, it’s worth adding that ESG ratings are designed using a complex and subjective methodology. As a result, ESG ratings are both confusing and lack transparency. It’s also impossible to compare ratings across industries. This makes retail investors quite rightly concerned about greenwashing.
Sugi, on the other hand, provides data specifically for retail investors. Our metrics focus on what people care about – the environmental impact of an investment on the environment, whether that’s a single company or many companies together in a fund – and how that investment compares with others in the market.
How does Sugi help retail investors see through greenwashing in the investment sector?
Researching new investments typically requires a decent level of detective work. A company report is usually the best source for determining what a company is doing to reduce their footprint, but, being produced internally, these need to be assessed with a critical eye.
For the very few who actually go through and read these reports, a sophisticated level of environmental knowledge would need to be assumed. The reader would need to know what questions to ask and to be able to distinguish between intent and action. This is also assuming the potential investor has the time to go through this report, which often isn’t the case.
Sugi gives users clear and objective data about an investment’s impact in terms of carbon emissions. Our data is sourced from S&P Trucost, world leaders in environmental data analytics. We also provide benchmarks and similar investments to compare with. This helps users filter through the greenwash as it means they can see how their investments hold up against their peers. Finally, Sugi is independent and we don’t advise on investments. Our mission is to inform investors and make it easier for them to reach their own conclusions.
In the long term, what will be the effect (on the investment sector and the planet) of more retail investors having a greater awareness of the carbon impact of their portfolios?
In the UK, there are 3 million DIY investors. That’s not counting the 33 million who hold a pension. If everyday investors use their money to support truly green companies (and demand their asset managers do the same) we’d see a real shift in corporate behaviour. Reducing carbon emissions is not a nice to have – it’s absolutely critical to the survival of the planet. And we can all play our part.