Investors have always aimed for good returns from their investments AND return of their capital when requested, but as the Tommy Stubbinton writing in the FT today, bond investors are struggling to get any return at all. He writes, “Making an investment that is guaranteed to lose money sounds like something that would cost you your job. But in bond markets, it has become a fact of life.”
Sustainable investment, on the other hand, is booming. A recent Morningstar study of European funds found that funds marketed as sustainable are more likely to be top performers. They also found that more than two-thirds of sustainable funds beat the average in their category, e.g. in bonds or equities.
ESG led investment and operations
Hortense Bioy, director of passive strategies and sustainability research for Europe at Morningstar commented that, "Investors tend to invest in companies with a strong ESG focus, which tend to be lower-volatility and higher-quality companies that hold up better during market downturns.”
While Vanguard, a member of The Principles for Responsible Investment (PRI), an independent global alliance of asset owners, investment managers and investment service providers, has just released their first PRI Transparency Report. Vanguard supports responsible investment through:
- Advocating for responsible corporate governance, particularly with the companies in which Vanguard funds invest, as a driver of long-term value creation.
- Voting in support of proxy proposals that, in Vanguard's view, will improve our clients' long-term investing outcomes.
- Acting on relevant environmental, social and governance opportunities or risks in Vanguard fund investments.
The Pearson Group have been driving their ESG programme for many years. Sustainability is “Not a case of be good or be profitable” says James Kelly Pearson’s corporate treasurer as he and Jason Walters, Director of Sustainability described their award-winning sustainability programme.
Pearson has used sustainability to bring the group together giving each manager and staff a role as they drive the programme globally under three pillars:
- Be a trusted partner
- Reach more learners
- Shape the future of learning.
This programme has improved Pearson's global market standing and has provided the framework for long term growth. “Acting sustainably is completely compatible with delivering in the long term”, believes Kelly. (See the Pearson Group WEBchat here.)
Climate change costs and opportunities
There are opportunities in reacting to climate change. In the recent CDP report, Global Climate Change Analysis 2018, on 215 of the biggest global companies - representing nearly US$17 trillion in market capitalization have valued the climate risks to their businesses to be:
- almost US$1 trillion - with many likely to hit within the next 5 years
- potential US$250 billion in losses due to the write-offs of assets.
- US$2.1 trillion, nearly all of which are highly likely or virtually certain.
(See our report on this here.)
CTMfile take: Sustainability programmes make sense for all concerned, for: the companies, the investors, employees and mankind.
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