Responsible investing - a myth or a reality?

Every one of us invests money to increase his/her own capital however not everyone wants to achieve their objective in the same manner.

A front which has been growing over the years is that of sustainable and socially responsible or ethical investing. In the US alone, more than $12 trillion dollars are currently being professionally managed in these kinds of strategies. This comes to no surprise with the topics like climate change, gender equality and sustainable development coming up constantly on the global agenda.

Sustainable, responsible and impact investing (SRI) is an investment approach that considers environmental, social and corporate governance (ESG) criteria to generate long-term returns and positive social impact.

Is there really any demand for this type of investing?

ESG assets and funds have been accelerated since 2015, pointing to a growing demand for such strategies.

From 2016 to 2018, sustainable, responsible and impact investing enjoyed a growth rate of more than 38 percent, increasing from $8.7 trillion in 2016 to $12 trillion. More than one out of every four dollars under professional management in the United States today—26% of the $46.6 trillion in total assets under management tracked by Cerulli Associates—is involved in SRI. (refer to table from Bloomberg below).

Will performance suffer?

One of the myths of sustainable investing is that in order to avoid a tobacco company or focus on environmental champions, the investor will end up with a drag on his performance for the sake of his/her own values.

In reality this is not true. Since September 2007, the MSCI World SRI index generated an annualized return of 3.88% vs 3.26% (in EUR terms) generated by the MSCI World. Not too bad for being the underdog! (Refer to the below chart for more detailed returns as at 31st December 2018).

Can I invest in sustainable strategies?

A well-known fund house in the ESG space is Steward Investors which manages the Steward Investors WorldWide Sustainability Fund. The funds invest in global shares which have environmental, social and ethical issues at their heart. The fund was launched back in 2013 and has since generated a healthy return of 61.7% (i.e. 12% per annum).

Furthermore, the fund has shown resilience in turbulent markets as it performed exceptionally well in 2018 with a negative return of just 1.2%. The broader based Global Equity Index (MSCI World) declined in value by 4.8%! (see part of the fund fact sheet below)

 

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