12172017

Sustainability

 

Many investors are now seeking to make a positive impact and sustainable investments are performing better than traditional ones, says Jens Spudy…

Portrait_Jens_Spudy

These days, investors are putting a stronger focus on environmental, social, and governance (ESG) criteria. The preconception that sustainability would have a negative impact on rate of return has been definitively disproved. The economist Alexander Bassen showed recently in a meta-analysis of 2,250 studies on the impacts of ESG that sustainable investments mostly performed significantly better than traditional investments. According to this study, investment returns and ESG criteria go hand in hand in most cases, particularly in the cases of real estate, bonds, and shares. Sustainable investments are less volatile in the long run because they avoid risks to humans and the environment. These investments support a company direction that will remain viable for the future and provide strong incentives for positive changes. And ESG strategies, which tend to have a long-term orientation, lead to long-term success, which our clients value. I find that simply excluding problematic industries such as munitions, fossil energy or GMOs is too short-sighted of an approach to ESG investing, as is the approach of looking only at best in class or best of class. Impact investing is much more interesting in the long term. This allows the investors themselves to have a direct influence. So far, this area has been in demand mainly from foundations, which are statutorily obligated to serve the common good and which will accept somewhat moderate returns in exchange for this influence. Private investors, especially in the younger generation, are also increasingly using their assets to make a positive impact. Having the support of an independent family office is thus very wise, because evaluating types of investments and companies according to ESG factors is deeply complex and a job for specialists. One seemingly simple option for getting ESG criteria and good returns in one place is through public mutual funds that focus on sustainability. But, according to Bassen, in these portfolios, in particular, the correlation between ESG criteria and investment returns is not so clear-cut. In this case, investors should focus to the actual value added and not let themselves be blinded by marketing. ■


Jens Spudy is executive partner of Spudy Family Office GmbH

Photo Credit: Jens Spudy Family Office GmbH

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