Navigating the World of Ethical Investments

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By Aaron Damiano Sparkes, Founder and CEO, Whisky 1901

As consumers become increasingly aware of environmental and social issues affecting society, their demand for products and services that address these causes and support their values continues to rise.

Research shows that 80% of consumers are willing to pay a premium for goods that are sustainably sourced or produced.[1] Over half of consumers also say they are actively choosing sustainable products to help reduce their ecological footprint.[2] And one-third of consumers say they would have more trust in brands recognised for their ethical and sustainable practices.[3]

Driven by these consumer preferences, many industries are now making a deliberate effort to showcase responsible and ethical business practices.

The principles of responsible investing

When it comes to financial services, stocks and shares for example, many investors are keen to ensure their investment portfolio is not only profitable but aligns with their personal values. As consumers’ collective conscience grows, some traditional investment funds, such as pensions, have come under scrutiny regarding their holdings in certain sectors, such as oil and gas companies.

Previously, responsible and ethical investments were perceived to be a niche market, but this is no longer the case. A recent report highlighted that more than three quarters (77%) of investors globally are interested in investing in companies or funds that aim to achieve, not only market-rate financial returns, but ones that also consider positive social or environmental impacts.[4] Also, 57% of investors said that their interest had increased in the last two years.[5] And this growth is only expected to grow. In the UK alone, the market for socially responsible investing is predicted to increase by 173%, reaching £48bn by 2027.[6]

The rise of ethics in alternative assets

Investors’ desire to make more ethical investments is not limited to traditional investments either; it applies to the growing alternative investment market, which includes the likes of whisky, fine wine and luxury goods.

While some investors may have concerns about supporting alcohol brands due to health concerns and the social impact of over consumption, there has been a significant shift in the industry to promote responsible consumption and to positively contribute to communities through education initiatives.[7] Ultimately, investors need to weigh up any cons with the pros.

Take the Scotch Whisky industry, for example – it contributed £7.1 billion to the UK economy in 2022; it employs and/or supports the jobs of 66,000 people in the UK; and it is the UK’s biggest food and drink export.[8]

Given the above, and as a major manufacturer, the sector has a duty to tackle the climate crisis across all areas where production and distribution have an impact. With the launch of its ‘Sustainability Strategy’, the Scottish Whisky Association has committed to reaching net zero by 2040, a full decade earlier than the UK as a whole.[9] This includes moving to a circular economy where reusable, recyclable or compostable packaging is one of the main areas of focus, using water responsibly and caring for the land to minimise and reduce the impact of farming. Notably, the sector has already cut greenhouse gas emissions by more than 50% since 2008.[10]

As a Whisky cask investment firm, Whisky 1901 works with distilleries such as Bruichladdich, Bunnahabhain and Deanston, who are working to implement several sustainable practices.

Bruichladdich Distillery recently announced its aim to decarbonise all distilling operations by 2025.[11] As one of the largest private employers on the Isle of Islay, the distillery supports and promotes the local community. Similarly, Bunnahabain Distillery is also on track to become one of the first distilleries on the Isle of Islay to have a net-zero emission distillation process, having installed a biomass energy centre to support the island’s forests and economy with a locally sourced fuelling system.[12] Known for its organic whisky, Deanston Distillery was the first hydroelectric, self-sufficient distillery in Scotland, receiving a gold certification from the Green Tourism accreditation body for its sustainability practices.[13]

Sustainable initiatives appeal to a growing number of consumers striving to be more ethically conscious in their purchases. By implementing green credentials in their distilling operations, product packaging and shipments, and even in tourism, the Scotch whisky industry is giving back to its local and regional and communities too. And, while the cask whisky investment market is a relatively new, albeit growing industry, these ESG (Environmental, Social, and Governance) initiatives only make it a more attractive alternative investment opportunity.

Balancing principles and profitability

The market for whisky investments has seen dramatic growth in recent years with 14.95% growth in 2022 and global whisky sales on track to reach £99.48 billion by 2028.[14] These ethical and sustainable investments are becoming increasingly popular and an attractive choice for ethically conscious investors.

Prioritising ethics doesn’t mean compromising on financial returns. In fact, ethical investments are relatively resilient when compared to traditional investments that are impacted by industry uncertainty and geo-economical events. Historically, socially responsible investments have demonstrated a remarkable capacity to weather market fluctuations. Indeed, ethical investments outperformed traditional funds in the first half of 2023.[15]

So, by gradually shifting to a more ethical and responsible investment portfolio strategy, investors can help make a meaningful social and environmental impact, whilst also reaping the financial returns of an investment.

Strategies for exploring ethical investments

One strategy for alternative investments is socially responsible investing (SRI), which focuses on selecting investments based on their positive social impact and alignment with personal values. This strategy involves evaluating whether companies or industries contribute positively to the community and choosing to invest in those that reflect these ethical standards. By integrating ESG factors into investment decisions, investors can support businesses committed to ethical practices while still aiming for strong financial returns.

When starting any investment journey, it’s crucial to consider factors such as budget, financial goals, risk tolerance, and the social or ethical implications of the investments. For alternative assets like fine wine or whisky, investors should ensure that their advisors or brokers work with reputable wineries and distilleries that uphold strong, transparent ESG policies.

[1] https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-voice-of-consumer-survey.html

[2] https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-voice-of-consumer-survey.html

[3] https://www.deloitte.com/uk/en/Industries/consumer/research/sustainable-consumer.html

[4] https://www.morganstanley.com/ideas/sustainable-investing-on-the-rise

[5] https://www.morganstanley.com/ideas/sustainable-investing-on-the-rise

[6] https://www.triodos.co.uk/press-releases/2018/socially-responsible-investing-market-on-cusp-of-momentus-growth

[7] https://www.diageo.com/en/news-and-media/stories/2021/diageo-reaches-millions-of-people-with-2021-global-drinkiq-campaigns

[8] https://www.scotch-whisky.org.uk/industry-insights/facts-figures/

[9] https://www.scotch-whisky.org.uk/newsroom/scotch-whisky-commits-to-reach-net-zero-by-2040-with-launch-of-new-sustainability-strategy/

[10] https://scotch-whisky.org.uk/newsroom/sustainability-numbers-add-up-for-green-whisky-strategy/

[11] https://www.forbes.com/sites/christophermarquis/2024/04/10/bruichladdich-distillery-plans-to-decarbonize-all-operations-by-2025-heres-how/

[12] https://whiskymag.com/articles/bunnahabhain-aims-for-net-zero-with-biomass-energy-centre/