Yields and impacts

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How can sustainable investing yield healthy returns while making an impact?

Sponsored Content, James Hibbs and Mbali Makhathini, of Melville Douglas, reply:

AS the world commemorates Earth Day, the Covid pandemic, COP26 and other major events in recent years have made it abundantly clear that industry needs to transform the way it does business to reduce harm on society.

During the pandemic, with more people than ever concerned about business impact, ESG investments outperformed other investments and showed resilience through wave upon wave of Covid outbreaks.

Deloitte estimates that ESG-mandated assets could grow to half of all managed assets in the United States by 2025 (from just over 25% in 2018), and continue growing in the years to come.

In 2015, 193 companies adopted the United Nations Sustainable Development Goals. Now, 8,550 companies in the MSCI All Country World Index have been measured from ‘strongly aligned’ to ‘strongly misaligned’ against the UN SDGs.

There is also significant opportunity to generate value, with the UN estimating around US$12 trillion in global economic value waiting to be unlocked from integrating ESG principles. Sustainable brands have been shown to grow 1.6 times faster than non-sustainable brands. Unfortunately, because companies are aware of the demand for sustainable products and services and sustainable investing, there are groups that resort to shortcuts, like greenwashing, or falsely representing a business as sustainable.

However, Dr Emiko Caerlewy-Smith, chief executive at KIT Consulting, recently highlighted that to ensure data integrity, available data could enable investors with a growing appetite for positive environmental and social impact investments to make more informed decisions. To this end, COP26 has triggered the formation of the International Sustainability Standards Board, which will develop sustainability standards for all companies to report against in future.

Mbali Makhathini, head of ESG at Melville Douglas, explained how the evolving investment landscape required a deeper understanding of investors’ concerns and interests in their development of an ESG Strategy.

‘Melville Douglas’s investment approach and philosophy allow for the screening and allocation of clients’ capital to quality companies and funds with a strong ESG underpinning,’ she says.

James Hibbs, head of Melville Douglas diversified investment solutions, believes there is an undeniable investment case for investing responsibly.

‘Investing in companies that make positive impact produces competitive long-term returns for investors, as ESG acts as a fundamental risk-management tool that shields investors from financial loss. Melville Douglas launched the responsible portfolios over four years ago and has delivered outperformance for their clients, without taking undue additional risk,’ he adds.

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