As the year comes to a close and the holiday season approaches, investors may be seeking to dive deeper into the world of sustainable and ethical investing.
A steady increase in sustainable investing (SI) assets under management (AUM) has been observed over the past two decades, according to Rachel Whittaker, head of SI research at Robeco, who told InvestorDaily that a notable acceleration has occurred in recent years.
She identified three key drivers behind this trend: a heightened societal awareness and a generational mindset shift, evidenced by social movements like Extinction Rebellion and Black Lives Matter; a supportive regulatory environment, including government commitments to financing a sustainable transition to a low carbon economy; and the availability of a diverse range of products embedding sustainability into various investment philosophies.
Addressing the timely issue of aligning values with investment choices during the holiday season, Ms Whittaker emphasised the importance of understanding investment philosophies beyond just product names.
She highlighted ongoing efforts to standardise definitions of “sustainable” but emphasised the necessity for investors to delve into the specifics of a strategy.
“It’s therefore important to look beyond the names of products and understand exactly what the investment philosophy is, what the manager aims to invest in or commits to not investing in, to have confidence that the strategy actually meets an investor’s needs,” Ms Whittaker said.
When asked about exemplary companies prioritising environmental, social, and governance (ESG) factors, Ms Whittaker refrained from mentioning specific names for compliance reasons.
However, she recommended sustainable thematic investing for those seeking opportunities where sustainability is central to the investment thesis.
“If investors are looking for investments where the sustainability focus drives the opportunity, then sustainable thematic investing is a good place to start,” Ms Whittaker suggested.
“These types of funds address specific sustainability problems such as access to clean water, transition to a low carbon economy, better health and wellbeing, and invest in the companies that aim to profit by developing solutions to these problems.”
Navigating the diverse landscape of sustainable and ethical investments, Ms Whittaker offered advice to investors looking to make well-informed decisions that align with their values and contribute to a positive impact.
She highlighted different mechanisms for impact, ranging from private market investments in impactful projects to public market engagements supporting impactful companies.
“In public markets, we see engagement strategies as having the most potential to drive change and create positive impact through our investment activities,” Ms Whittaker continued.
“Typically, investors need to balance their impact contribution with their personal investment goals and risk and liquidity tolerances.”
As sustainable and ethical investing continues to gain momentum, investors are urged to look beyond the surface, understand the intricacies of investment strategies and choose paths that align with both personal values and broader positive impacts on the world.
