Sustainable investing will sacrifice investment returns...
There is mounting evidence that sustainable investing does not sacrifice performance, in fact, incorporating ESG factors into investments can help boost financial performance. Overall, businesses that demonstrate greater operational sustainability (ESG) and sustainable products & services, can perform better.
Evidence indicates that the positive correlation between sustainability and performance holds both at the corporate accounting, and investment performance level. The reasoning is that businesses managing E, S and G better than peers demonstrate better risk control and compliance, suffer fewer severe incidents (e.g. fraud, environmental spill litigation) and ultimately carry lower tail risk. Additionally, ESG leaders invest more in Research and Development, foresee future risks and plan ahead to remain competitive.
Impact investing also offers the opportunity to capture the potential upside from competitive advantage, sustainability trends and legislative support. Impactful companies are those that have turned the largest societal challenges into profitable business opportunities. These companies benefit from the growing global demands for their products and services, greater regulatory support and from avoiding reputational and stranded asset risks. A recent example is the EU pandemic recovery package that demarcates special financial support for green economic activities.
Market evidence is also accumulating – showing superior returns of many sustainable strategies over their traditional equivalents. At EQ Investors, the Positive Impact Portfolios have been our best performing portfolio range, beating their benchmark for each of the nine years since their inception.
Sustainable investing will sacrifice investment returns.