As we head into yet another new year, you’d think by now it would be widely accepted that sustainable investing does not negatively impact portfolio performance. However, the stigma sadly persists.
With two major investing factions – millennials and women – clamoring for sustainable options, it’s high time we put to rest this farcical notion that doing good doesn’t pay off.
According to the latest Morningstar report, “Sustainable Investing Research Suggests No Performance Penalty,” as of September of this year, over 1,000 asset managers have signed the “UN-backed Principles for Responsible Investment, committing themselves to incorporating sustainability issues into their investment processes.”
There has been much academic inquiry into this topic, and the single biggest finding – that SRI does not negatively impact performance – is not as prevalent as it should be, particularly among mainstream investors.
Morningstar’s report offers these key findings:
- Sustainable/responsible funds and indexes perform on par with comparable conventional funds and indexes
- Companies with higher ESG scores can outperform comparable firms in both accounting and stock market terms
- A focus on company-level ESG factors can lead to better risk adjusted performance at the portfolio level
It’s highly pertinent that financial intermediaries step in to help their clients incorporate sustainability into their portfolios.
Check out Morningstar’s impressive research here.