By Vikas Vij — Sustainable or ESG investing originally broke ground when fund managers began actively engaging with companies and started voting down inefficient governance decisions. Firms with weak ESG commitments started getting excluded from fund investment portfolios. The asset managers eventually began handpicking companies with a strong focus on ESG factors and socially responsible and ethical approaches.
In a report published last year, ESG data provider UK Sustainable Investment and Finance Association (UKSIF), said €2.6bn was invested in engagement strategies at the end of 2015, an increase of 53 per cent from 2013. There is €1.9bn invested via exclusion strategies – with the space seeing assets under management almost triple in the two years.
UKSIF’s figures also show strong growth in other areas, with sustainable funds seeing assets under management almost double, and impact investments nearly quadruple. An ESG overlay became a core part of Stewart Investors’ offering. Hermes and Royal London Asset Management are other firms known for providing ESG and sustainability-related investment strategies.
Fund launches addressing demand in the sustainable universe are now increasingly commonplace. Supporting this demand is a better understanding among retail investors that investing in sustainable funds does not necessarily come at the cost of performance.
For instance, Stewart Investors Worldwide Sustainability Fund has doubled investor money in five years, compared with a 75 percent gain in the MSCI World index. Similarly, the Premier Ethical and Kames Ethical Equity strategies have outperformed the FTSE All-Share by 53 and 17 percentage points, respectively.
UKSIF says ESG, socially responsible and sustainable investing has exploded in the UK. The space is expected to grow further as younger investors enter the market.
Source: FT Adviser
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