The financial case for responsible investment is equally as compelling as the moral and social arguments embedded within the strategy, says Impax Asset Management.
Speaking to InvestorDaily, Impax Asset Management chief executive Ian Simm said in an environment where value and growth prospects are hard to find, responsible investment could be the answer.
Mr Simm said the outlook for responsible investment is increasingly strong, particularly when considering secular trends such as local air quality problems, urbanisation, water pollution, and food and water scarcity.
He argued that over the next 10 to 15 years there will be a large increase in investment opportunities and growth within this space.
“Long-term investing is now back in fashion and I think the opportunity for investors to put a chunk of their capital into an environmental markets mandate with a five-year view appears to be quite compelling,” he said.
Moreover, Mr Simm said the 2015 United Nations Climate Change Conference to be in held in Paris next month will likely result in some sort of moral agreement on climate change policy.
“A positive outcome will definitely encourage corporate investors to think seriously about energy efficiency and renewable energy business investment,” he said.
“When a global agreement gets implemented into regional policy it’s almost certain to entail tax or other financial instruments to reduce greenhouse gas emissions, which is going to raise the price of fossil fuel energy and therefore make energy efficiency and renewable energy more competitive.”
Mr Simm said from a purely financial perspective, the returns on renewable energy will likely improve.
According to Mr Simm, as the risks associated with fossil fuels increase, investors should look to slowly divest from the sector and decrease their exposure.
"Partial divestment is what we would recommend. Taking 5, 10, 15 per cent off the table in fossil fuels but then also reinvest that money into energy efficiency."
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