Are responsible investment funds outperforming because they look at environmental, social and governance factors before allocating their money, or are there other factors at play, writes Stephen Bartholomeusz. | OPINION
The rising tide and power of “socially responsible” funds is reshaping the investment and corporate landscape.
A similar percentage of investors agreed that the pandemic had accelerated their interest in ESG assets and that flows of funds into sustainable investments were expected to accelerate over the next three to five years. The survey also revealed that a rising proportion of the investors plan to include ESG factors into at least some of their assets under management over the next year.
All a fund manager has to do is to tilt their portfolio towards tech stocks, particularly the mega techs that have dramatically outperformed the overall market over most of the past decade. Those stocks have a very light carbon footprint.
Governance factors are, to date, perhaps more clearly correlated with financial outcomes, although there are exceptions. It could also be argued that, increasingly, sensitivity to wider social issues is a differentiator for companies that are reliant on a social licence to operate, and impacts the performance of their shares.
What’s clear from the UBS report is that there is no agreed framework or set of principles or guidelines that define what constitutes ESG-acceptable investments, or how ESG-influenced funds should measure and report on their performance, although there does appear to be increasing adoption of the Sustainability Accounting Standards Board’s standards.
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