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Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised.
Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised.
Intelligent Investor senior portfolio manager Nathan Bell said that it’s a commonly held misconception that ethical investors pay dearly for the privilege of favouring companies that are committed to environmental, social and governance (ESG) principles, but it couldn’t be further from the truth.
“Taking account of environmental, social and governance considerations in an investment process is not only important, it can improve investment outcomes,” he flagged.
He has cited “irrefutable evidence” of a clear link between ESG investing and more informed investment decisions, plus better risk-adjusted returns in the long run.
According to a meta study of 2,000 academic studies, there was a 90 percent non-negative link between the incorporation of ESG factors and corporate finance performance, while 63 percent identified a positive link, Mr Bell said.
He also pointed to another study, which revealed that in the first quarter of 2020 alone, more than 90 per cent of sustainable indices outperformed their parent benchmarks.
The research comes as coronavirus and its aftershocks “have put a greater spotlight on the importance of ESG issues, including income inequality, diversity and inclusion, social justice, employee welfare and climate change, to name a few”.
Reflecting on such ethical funds, Mr Bell said that by their very nature they “push investors into high-quality businesses, which due to their strong growth trajectory and robust balance sheets are often economically immune from cycles”.
“All that pays off in a crisis, which is why those stocks recover the fastest.”
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