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Profit vs impact: investors choose sustainability for better returns

 
David Brett
Germany Invests Heavily In Solar Energy
A workman installs solar panels (Source: Getty)

Sustainable investing has long been regarded as more of a philanthropic pursuit, putting positive impact ahead of making a profit. But a major new study shows investor attitudes may be shifting.

The 2017 Schroders Global Investor Study of 22,100 people who invest across 30 countries found the majority of them view sustainable investing as a way to generate profits and not just potential positive impact.

The chart below shows investors’ average responses when asked about how they invested in six different types of sustainable funds or ways of investing:

  • Medical science/biotech.
  • Green technology.
  • Avoiding oil, gas or coal companies.
  • Positive social impact.
  • Improving how companies are run.
  • Improving diversity.

They were asked whether they invested in them for potential profit versus positive social and/or environmental impact.

Investors were given a scale between one - for positive impact - and five - for profit. A score above 3.0 meant investors lent more towards profit. The responses for all six fund types were close to 3.0, as shown in the chart below.

The average across all six was 2.9. This meant investors were equally likely to choose sustainable investing as a path to better potential returns as for the impact it might generate on the world.

How investors back sustainability for better returns

Jessica Ground, Global Head of Sustainability, said:“Investors understand the impact that issues like strong corporate governance and diversity can have in generating profits.

“These views are backed up by research. MSCI, for example, shows companies in its World Index with high proportions of female leadership generate a higher return on equity – 10.1 percent a year, versus 7.4 percent for those without significant female representation on their boards.

"In a similar vein, a study by consultants McKinsey called ‘Why Diversity Matters’ found ethnically diverse companies were 35 percent more likely to outperform their peers.

“Our own research shows we are beginning to see more investors approach sustainability as a profitability question rather than an altruistic one.

“This is to be welcomed. Social and environmental change is happening faster than ever. The challenges posed by climate change, inequality and demographics are sizeable.

"Those companies able to adapt and thrive will continue to benefit disproportionately, while others will fall further behind. Investors increasingly recognise this.”

For more information vistors Schroders Global Investor Study 2017 hub.

Important Information: Schroders commissioned Research Plus Ltd to conduct, between 1st and 30th June 2017, an independent online study of 22,100 investors in 30 countries around the world, including Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines ‘investors’ as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last ten years. These individuals represent the views of investors in each country included in the study.

Important Information: This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Regions/sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

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