Sustainable investing is also based on the belief that by prioritising investment in the companies doing this, either through the products and services they produce, or by effective management of the environmental, social and governance (ESG) issues they face, superior long-term investment returns can be achieved. Done well, sustainable investing has the potential to improve the society we live in and deliver excellent investment returns.
To some extent, a bias remains that embedding what would be considered to be a non-financial goal, to improve the society we live in, will have a negative impact on investment performance. This may have been true at some point, but there’s ample evidence to suggest this isn’t the case now.
In recent years, we’ve seen customers place an increasing value on companies who provide solutions to some of the biggest societal issues of today. Whether this is the reduction of carbon emissions through moving to cloud computing or renewable energy, or the improvement of healthcare through better diagnosis and treatment of disease, companies providing genuine solutions tend to have stronger prospects. Equally those companies not managing their ESG issues properly expose customers to unnecessary risks, particularly as corporate behaviour is under more scrutiny than ever before.
This increased confidence in the ability of sustainable investing to deliver strong investment returns is happening at a time when most customers are looking beyond the basic utility of the products they buy, to wanting to understand the environmental and social context in which these products are made. We’ve seen this with the rise of organic and fresh produce within supermarkets, and concerns about the impact plastic’s having on the environment. It’s an entirely natural progression of this trend that customers are starting to question how their savings are being invested, and the social and environmental consequences of their investment decisions. Sustainable funds are a great way for customers to save in a positive way. Equally, there’s an increase in the regulatory requirement, particularly in the pensions market, to embed sustainability considerations.
We think we’re still in the early stages of the rise of sustainable investing. It’s increasingly being accepted as a style of investing capable of delivering strong investment returns and benefiting society as a whole.
The views expressed are the author’s own and do not constitute investment advice. All information is correct at January 2019 unless otherwise stated.
Head of UK Sustainable Investments
Mike is Head of Sustainable Investments and Fund Manager of the Sustainable Leaders, World and Diversified Trusts. He has managed the Sustainable Leaders since November 2003. Prior to this, Mike worked as a Deputy Fund manager at the Co-operative employee pension fund for two years and an investment analyst covering the utility, support services and media sectors. Mike originally trained and qualified as a Chartered Accountant with Ernst & Young in Manchester. The Sustainable Leaders Trust holds a Bronze Morningstar rating as at June 2017 and Mike has won two Fund Manager of the Year awards, in 2015 and 2017. Mike has spent the majority of his career assessing environmental, social and governance issues and how they influence investment decisions. He is a specialist in sustainable investing and one of the few fund managers in this area with such long tenure.