Our approach to sustainable investing.
Climate change, shifting demographics and the technology revolution are reshaping our planet. Companies able to adapt to this change will be more successful in attracting customers, grow their business and have a positive impact on our beloved planet.
Our approach aims to provide better returns over the long term by incorporating a climate ‘tilt’ to the the overall holdings of the products we invest in. This means having greater exposure to companies that are likely to benefit from the transition to a low-carbon economy.
Does sustainable means lower returns?
There remains some hesitation in finance regarding sustainable investing, often due to long held beliefs that sustainability requires sacrificing financial returns.
In a recent study by the Harvard Business School, the performance of 90 high-sustainability companies is compared to 90 low-sustainability companies. The study considers high-sustainability as “having a substantial number of environmental and social policies adopted for a significant number of years” and Low-sustainability as “firms that adopted almost none of these policies”. It concludes that over an 18 year period, the former outperformed the latter by 4.8% per annum.
To understand what's at stake, a 2015 study by the Economist Intelligence Unit estimates that the loss that could result from climate change to all globally managed financial assets is between $4.2 trillion and $43 trillion, between 2015 and the end of the century. The study finds that much of the impact on future assets will come through weaker growth and lower asset returns across the board.
As more scholars cover this topic, the evidence is starting to stack up in favor of companies paying due regard to social and environmental concerns. The financial sector is paying attention and starting to adapt. As this trend progresses, we will slowly ratchet up our exposure to high-sustainability companies. Our present goal is to make ensure our portfolios have a substantially lower carbon footprint that the industry norm (more data on this to follow).