If You Want To Do Good, Opt For Sustainable Investing: Making a positive impact on society and targeting competitive financial returns
James Mackintosh’s June 28 article, “If You Want To Do Good, Expect To Do Badly: Investors need to choose between backing their beliefs with dollars, or being profit-minded capitalists” misses the mark and is out of touch with the latest studies, data and trends from Barclays, Deutsche Bank, Morgan Stanley, Morningstar, MSCI, Nuveen/TIAA and UBS, among others. MacKintosh’s assertions simply aren’t supported by the facts.
We at US SIF: The Forum for Sustainable and Responsible Investment know that the weight of substantive evidence shows that investing using ESG factors does not lead to worse results. US SIF, the leading voice advancing sustainable, responsible and impact (SRI) investing, identified $8.72 trillion in total US-domiciled assets under management using SRI strategies at the start of 2016, an increase of 33 percent since 2014.
A growing body of evidence indicates that ESG investments achieve comparable or even better financial returns than conventional investments. In 2017, Nuveen/TIAA Investments, after assessing the leading SRI equity indexes over the long term, “found no statistical difference in returns compared to broad market benchmarks, suggesting the absence of any systematic performance penalty. Moreover, incorporating ESG criteria in security selection did not entail additional risk.”
A 2015 report by the Morgan Stanley Institute for Sustainable Investing found that "investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments." This is on both an absolute and a risk-adjusted basis, across asset classes and over time, based on its review of US-based mutual funds and separately managed accounts.
Addressing ESG issues in investment provides additional data to help manage risk and avoid companies that may be affected by major scandals. Volkswagen’s cheating on carbon dioxide emissions testing and BP’s 2010 oil spill in the Gulf of Mexico are two high profile examples of how mismanagement of sustainability issues can have financially material consequences.
In 1970, Milton Friedman wrote that business has a responsibility to make as much money as possible “while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” The world has changed a lot since then, but Friedman was right to point to the critical importance of those “basic rules of society.”
We agree with BlackRock CEO Larry Fink that “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” If companies can deliver for their customers and their communities, in the long run, they will deliver for their shareholders.
We at US SIF: The Forum for Sustainable and Responsible Investment know that the weight of substantive evidence shows that investing using ESG factors does not lead to worse results. US SIF, the leading voice advancing sustainable, responsible and impact (SRI) investing, identified $8.72 trillion in total US-domiciled assets under management using SRI strategies at the start of 2016, an increase of 33 percent since 2014.
A growing body of evidence indicates that ESG investments achieve comparable or even better financial returns than conventional investments. In 2017, Nuveen/TIAA Investments, after assessing the leading SRI equity indexes over the long term, “found no statistical difference in returns compared to broad market benchmarks, suggesting the absence of any systematic performance penalty. Moreover, incorporating ESG criteria in security selection did not entail additional risk.”
A 2015 report by the Morgan Stanley Institute for Sustainable Investing found that "investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments." This is on both an absolute and a risk-adjusted basis, across asset classes and over time, based on its review of US-based mutual funds and separately managed accounts.
Addressing ESG issues in investment provides additional data to help manage risk and avoid companies that may be affected by major scandals. Volkswagen’s cheating on carbon dioxide emissions testing and BP’s 2010 oil spill in the Gulf of Mexico are two high profile examples of how mismanagement of sustainability issues can have financially material consequences.
In 1970, Milton Friedman wrote that business has a responsibility to make as much money as possible “while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” The world has changed a lot since then, but Friedman was right to point to the critical importance of those “basic rules of society.”
We agree with BlackRock CEO Larry Fink that “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” If companies can deliver for their customers and their communities, in the long run, they will deliver for their shareholders.
Comments (1)
7/5/2018 11:40:38 AM
Social Finance has the opportunity to be a leader in development in the markets. If the structures their debts in constant purchasing power, would that not increase the probability of success, use less cash to support the debts, increase the deliverable to the targeted groups etc.? Funding would see an immediate shift upward and to the right of their portfolio’s efficient frontier? What is the resistance to this?