14 October 2019 | Comment | Article by Jason Lloyd
The world is facing a rising tide of challenges, from political chaos to unsustainable levels of waste and pollution, to vast and growing social inequality.
Many people want to support a sustainable, greener, cleaner future. Cutting pollution, choosing companies with transparent supply chains, and reducing use of plastic bags and disposable coffee cups are decisions that we make on a daily basis, and we do this without compromising on quality.
So when it comes to investment, likewise investors can contribute a similar pivotal role in directing capital to where it is most needed.
Responsible investment is an exciting and growing area of finance, and demand for investment solutions from both institutional and retail investors has been increasing. We believe this trend will continue to strengthen, supported by governmental and non-governmental initiatives across the world.
While responsible investing is not a new concept, there is still a fair degree of confusion around;
• which products or services have a transformational effect on society or the environment;
• which provide the tools for others to deliver positive social or environmental impact; and
• which spearhead the development of sustainability in their industries.
At its simplest, ethical funds tend to focus on excluding certain controversial sectors like tobacco, alcohol, weapons or gambling and increasingly ‘black’ sectors such as thermal coal or even fossil fuels in general.
Environmental, Social and Corporate Governance (ESG), by contrast, applies to all sectors and acts predominantly as a risk framework, examining how companies might be exposed to environmental, social and governance factors and how they’ve arranged specific strategies to mitigate these risks (or not).
Following the 1983 World Commission on Environment and Development (WCED), the 1987 Brundtland report named 'Our Common Future' was published, defining Sustainable Development as:
'development that meets the needs of the present without compromising the ability of future generations to meet their own needs'
The report highlighted three fundamental components to sustainable development: environmental protection, economic growth and social equity. The United Nations’ 17 Sustainable Development Goals are a blueprint to address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. Building on the principle of “leaving no one behind”, the new Agenda emphasizes a holistic approach to achieving sustainable development for all.
Given the scale of the challenges the world is facing today, we believe that sustainable investing should increasingly help drive solutions, and can do so while delivering attractive investment returns to investors.