SG Voice is interested in startups disrupting the status quo. Sugi has created an app which allows retail investors to understand the emissions impact of their investment portfolios, and offset against their impact.
- Global trends around sustainability and climate risk are driving fundamental changes in business.
- Digitalisation and technology disruptors are accelerating underlying transformations in the economy.
- Sugi is addressing the growing interest of retail investors in going green and understanding the impact of their investments.
The company was founded by chief executive Josh Gregory in London in 2020, as a means of helping retail investors build a greener, more sustainable investment portfolio.
Sugi founder Josh Gregory says: “Our passion is to bring transparency to green investing and make it easier for investors to make genuinely greener choices. ”
What problem is Sugi solving?
Sugi was designed to help investors get transparency on whether particular investments constitute greenwash or not. Gregory says: “ESG ratings are a minefield for non-professional investors.
“The ratings themselves are subjective, greenwashing is rife and the metrics are mainly used to measure financial risk, rather than real-world impact. We created Sugi to provide an objective, reliable dataset that catered specifically to non-professional investors concerned about their impact on the planet.”
Sugi is targeting retail investors who are interested in taking an ESG lens to their own investments. While the ESG market, and ratings, are complex and confusing for the institutional investor there is little to no support for the retail investor. Given the growing focus on climate action as part of being a responsible citizen, it is no surprise that retail investors are crying out for support in investment decision-making.
This matters not only because realigning capital towards sustainable investment is needed, but because of the rapid increase in the size of the retail investment market. According to data from Morningstar, in the US sustainable funds saw an inflow of nearly $70 billion in 2021, a 35% increase over 2020’s highwater mark. But it still remains short of mass market adoption.
Nonetheless, the retail investor market is rapidly growing and, according to US financial advisory group Betterment, made up around 17% of the market in January 2020 – a number that shot up to over 25% in July and August of that year.
The retail investment market has seen a particular boost since the pandemic and according to Schwab research, around 43% of people who have recently taken up personal investing have shared that they have plans of investing more in the market.
Gregory says, “In 2020, the Financial Times estimated that 15% of the UK stock market was owned by individual shareholders, a number that is steadily increasing.
“Non-professional investors are an important piece of the green finance puzzle and are increasingly becoming more and more active. However, to date, they haven’t been presented with information about their impact in a way that caters to their specific needs. That’s why we created Sugi.”
What is the product and how does it work?
Sugi works with financial institutions, platforms and advisers across the UK and Europe to deliver personalised climate metrics, via API and other methods, for the benefit of non-professional investors.
It shows investors the carbon impact and the global warming potential (GWP) of their investments, alongside benchmarks and similar investments to compare with, and the company is constantly adding new metrics and features. It’s designed to give investors a full picture of their impact in a way that cuts through greenwash.
What are the biggest challenges in developing a product for retail investors?
There’s a great deal of obfuscation in the finance industry around the true environmental impact of investment products. Obviously regulation has a part to play, but there remains a sense that investors are not being told the whole story.
Gregory says: “Time and time again, we see savvy investors using our platform thinking that they have made a green investment, only to find out that it is anything but. This leads to all sorts of things like confusion, mistrust in the market and even disengagement from green investing altogether.
“Key to this is using objective, reliable data (which we do), educating investors and the industry on impact, and presenting data in a way that works specifically for non-professionals.”
What do you think it will take to scale up your product and on what timeline?
Sugi’s initial partnerships have been with wealth managers and financial advisory firms in the UK and Europe. In 2023, the company will be expanding into more segments and helping more financial institutions communicate impact to their customers.
What is the company’s next big goal or milestone?
Gregory says: “We are about to expand our data coverage – watch this space!”
Is Sugi a sustainable business?
Sugi is targeting the finance industry, specifically, presenting data around the impact of investments to drive greener investment choices. That is an external sustainability focus.
That said, adds Gregory, “It’s important that we practice what we preach so we are also conscious of our own impact; for example, we are a fully remote team.”
Funding to date
To date, the company has been backed by a syndicate of angel investors, and also held an overfunded crowdfunding campaign on Crowdcube. The total raised to date is around £700,000.
Who do you consider your biggest rivals?
ESG is dominated by big data. Gregory believes that Sugi is disrupting that market by providing a tailored solution that’s based on real, unaddressed needs. He says: “Our biggest ‘rival’ – the thing that keeps us up at night – is the indifference caused by overexposure to false information on environmental impact. The planet is in a climate crisis.”