Michael Jantzi, Founder of Sustainalytics, spoke at the Morningstar Virtual Conference and shared his insights on the current market and impact on sustainable investing. He believes we’re at an inflection point and change is ahead.
The time is NOW
A recent Morningstar study showed that over 70% of investors were interested in discussing sustainable investing with their advisor.
The data showed that women were more interested than men, younger investors were more interested than older investors, and the interest tended to skew a bit toward more high net worth clients but generally all investors were interested in having the conversation.
Investors are saying they want an opportunity for their investments to more closely align with their own personal values.
Actions speak louder than words
According to Jantzi, the market has been telling us for some time that change is coming. For many years investors were saying they were interested in sustainable investing but their actions didn’t show it – the industry wasn’t seeing large asset flows.
Fund flows are telling us now that change is here and that there has been a powerful shift in the markets.
In 2006 PRI (Principles for Responsible Investing), an industry association for those interested in and practicing responsible investing was launched with only 19 signatories. Today there are more than 3K signatories collectively managing more than 100 trillion in assets.
2020 has been fraught with market volatility. Despite the market swings, this year has seen record inflows into ESG funds. In the US alone, in the second quarter, 10.5 billion flowed into ESG funds. In 2019, fund flows were four times greater than flows in 2018. Despite the volatility and uncertainty ESG funds continue to see massive inflows.
A new conversation
Sustainability has entered into ALL conversations – not just about investing. Companies are reacting and putting sustainable processes in place. Investors want their money to go toward something more aligned with their values.
More than just lip service
Sustainable investing is about more than just investing – it has morphed into something larger in that companies are now integrating sustainability into financial and business decisions. There is a profound shift in the conversations that companies and investors are having. In the past, ESG investments were considered risky and the challenge was how to integrate them into a portfolio to get the benefit of the social impact while minimizing the risk but now the conversation is about the outcome.
Investors are asking, “what is the impact of my investment decision on the environment? On society? On my community?”
Jantzi believes this shift in conversation – from one based on process to one based on outcome – and why he thinks we’re at an inflection point. Investors are now understanding they can personalize their experience. They can invest in their values not only by keeping their money away from companies with practices they don’t support but by allocating their funds to companies they believe are addressing some of the risks.