27 September 2019
Sustainable investments: good for the planet and good for your money
Do you want your savings to bear interest while contributing to a better world? In that case, socially responsible investments are perfect for you.
An investment needs to be considered long term. And it is precisely in the long term that socially responsible businesses distinguish themselves, obtaining better results that “traditional” companies. Why?
What is the potential return from socially responsible investment?
“A sustainable business is less profitable”, “a socially responsible investment (SRI) is a marketing ploy” and so on.
Clichés die hard. Yet numerous comparison studies conducted on this subject have revealed that socially responsible investments offer a return on investment not only similar to “traditional” investments but also superior to that of a savings account.
Indeed, a company that pays its employees fair compensation, limits its energy footprint as much as possible or does not evade taxes, will certainly be better equipped for the future than those who do not take these concerns into account.
A socially responsible investment (SRI) therefore offers a return that is not only stable but also entails less risk in the long term. The risk-return ratio is therefore far more attractive than with a traditional investment.
As proof, according to data compiled by MSCI (provider of top-level indices and stock market information), a basket of global shares fulfilling environmental and social criteria (ESG) performed in a broadly similar way over five years, compared to traditional shares.
Created in 2014, the MSCI World ESG Universal is a global index that replicates the performance of a basket of around 1,600 shares from companies presenting a solid ESG profile, with presence on 23 markets.
Return of the MSCI World ESG Universal global index in USD since 2014
What is the impact of socially responsible investment on the planet?
Socially responsible investments not only promise return, they also have an impact at a societal and environmental level.
As an investor, by excluding companies that do not take environmental and societal criteria into account, you encourage other companies to act sustainably. In addition, you are ensuring that your money helps go towards purposes that respect man and the environment.
The more popular the concept of sustainable investment becomes, the more companies find themselves forced to apply sustainability criteria. If they don’t comply, they will be left on the sidelines.
The ESG fund managers defend these values during general meetings of companies in which the fund invests. As a shareholder, you are therefore in continuous dialogue with the company concerned.