This is supported by several academic studies, which show evidence of boosting investment returns when incorporating ESG factors. Successful engagement and companies managing ESG risks can have a positive effect on performance. Factors like changing regulation, companies making sustainability pledges and consumer behaviour (especially in younger generations) add to a healthy long-term investment case for sustainability.
ESG investing can also create value for investors beyond investment performance as they can align their own values and beliefs with their investments.
Source: Morningstar Direct as of 28/03/2023.
Past performance is not a guarantee of future performance.
All these factors combined create a strong and structural tail wind for companies that have a strong ESG profile. Companies that are not paying enough attention to sustainability on the other side will increasingly face risks both from a legal point of view and from a competitive standpoint. Asset owners around the world will want to reflect the preferences of their clients and drive asset flows.
Source
- Clark, Gordon L. et al, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (March 5, 2015). Available at https://ssrn.com/abstract=2508281 or http://dx.doi.org/10.2139/ssrn.2508281
- Barko, Tamas et al, Shareholder Engagement on Environmental, Social, and Governance Performance. Journal of Business Ethics, 2022, 180, pp. 777–812, CentER Discussion Paper Series No. 2017-040, European Corporate Governance Institute (ECGI) - Finance Working Paper Available at https://ssrn.com/abstract=2977219
- Whelan, Atz, Van Holt and Clark. ESG and Financial performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020. Available at: https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU-RAM_ESG-Paper_2021.pdf
- Versace, Abssy: World Reimagined, How Millennials and Gen Z Are Driving Growth Behind ESG. Available at Nasdaq.com 23-09-2023
Authors:
AJ Singh Head of ESG & Sustainable Investing
Bas Gradussen Sustainable Investment Strategist
Giang Vu Sustainable Investment Strategist
Martynas Rudavicius Sustainable Investment Strategist
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