A recent report (March 2015) from Morgan Stanley found that there is a positive relationship between corporate investment in sustainability and stock price and operational performance. Companies that take environmental, social and governance issues seriously are inherently in a better position to prosper than those that don’t, and these factors can have a very real effect on the value of a stock.
The report focuses on the US market, and found that 64% of sustainable equity mutual funds had equal or higher median returns and equal or lower volatility than traditional funds over seven years. This provides evidence that integrating sustainability into the investment process does not hinder performance, a myth which is still commonly believed.
So how do the Alliance Trust Sustainable Future funds compare?
Investing should be done in a responsible way, and that means holding on for the long term – over 3 or 5 years, or longer.
So how is it that investing in companies with fewer impacts on the environment and products which improve quality of life yields better outcomes? Surely there should be a trade off between ‘being good’ and ‘making money’?
Companies which are better for society should experience greater support from society, either through buying more of their product, or through Government regulation or fiscal measures. Conversely companies operating against the interests of society will face headwinds of regulation and consumer preference.
Of course this is not the only metric that matters.
This sustainability analysis has to be combined with rigorous analysis of business fundamentals and valuation. However it is an important, and often overlooked, metric in identifying higher quality companies likely to experience strong growth.
Wealth generation for our clients can proceed hand in hand with generating broader sustainable prosperity.
Of course this is a broad overview and you really should take personal advice from one of the small group of adviser who fully understand this form of investment.
This article in no way gives any advice or encourages any reader to take an particular approach to their investment