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The long road to sustainable investing
By Sophia Grene
Published: October 18 2009 11:06 | Last updated: October 18 2009 11:06
Writing about sustainable investing used to be easy. There were a small number of people involved, a few funds whose
policies were relatively clear and you could easily put a number on the assets that were managed in accordance with
environmental, social and governance criteria.
Now it is hard even to get started without switching off e-mail and phone to stop being deluged with press releases about
new climate change funds, microfinance initiatives, and analyses about the alpha added by sustainable investment policies.
A bandwagon that started rolling a few years ago has now built up juggernaut momentum and those who do not jump on it
risk being flattened.
Although there may be a large element of “greenwashing”, lip-service paid to environmental concepts as a marketing ploy, in
all of this, it is hard to escape the impression that a substantial proportion of investment professionals in Europe at least are
changing their ideas about the intersection between investment and responsibility.
“Convinced that taking account of environmental, social and governance criteria brings a better understanding of businesses
and a better evaluation of our risks as investors, we have decided to integrate this approach into our traditional financial
analysis of companies.”
This statement is on the website of French asset manager Financière de l’Echiquier and is indicative of how much both
investment management and attitudes to responsible investing have changed.
A number of factors have combined to bring this about. The most obvious is a massive increase in awareness of climate
change and its possible impact. Even the sceptics (who abound, particularly in the US) are starting to accept they may have
to pay attention to regulation, whether or not it is based on good science.
One eminent convert to investing for climate change is Stanley Fink, formerly of Man Group, who last year set up Earth
Capital Partners, a venture capital fund aiming to invest in energy security and climate change.
Earth Capital’s wish-list, which covers solar, waste-to-energy, agriculture and new technologies in the first instance, with
infrastructure, carbon trading and energy arbitrage to come at a later date, shows just how broad the opportunity range is.
And climate change is just one element of sustainable investing.
The earlier scepticism about sustainable investing – “are investors really prepared to forego returns just to feel good?” – is
still around, but a wide array of research is emerging to show the sceptics are not asking the right question. There may be
no need to forego returns.
According to research by Meir Statman and Denys Glushkov, which won the 2008 Moskowitz Prize for Socially Responsible
Investing and was published in May’s issue of the Financial Analysts’ Journal, socially responsible investment wins on the
swings what it may lose on the roundabouts, putting it, in aggregate, on a par with conventional investment.
Specifically, the negative impact on investment returns of refusing to invest in “sin stocks” such as tobacco or arms
manufacturers is outweighed by the positive effect of tilting the portfolio to companies that are good at corporate governance
and managing their impact on the environment in which they exist.
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