Those in the Know Find Value in Sustainable Investing
By Kymberly Levesque
A new report from DB Climate Change Advisors (DBCCA, a division of Deutsche Bank) concludes that investment managers who understand the intricacies of sustainable investing can often capture value-added performance.
While sustainable investing is often criticized as yielding middling results, “Sustainable Investing: Establishing Long-Term Value and Performance” found that this may be due to what funds are grouped under the heading “sustainable investing,” rather than the value of individual components.
DBCCA examined more than 100 sustainable investing studies from around the world, as well as 56 research papers and several literature reviews and meta studies. By breaking down the research into categories of SRI,* CSR,* and ESG,* analysts could then determine where value could be found under the broad umbrella of sustainable investing.
The report shows that environmental, social, and governance (ESG) factors correlate with “superior risk-adjusted returns at a securities level.” The report also concluded that companies with high ratings for ESG and CSR factors have a lower cost of capital while a majority of the studies reviewed showed companies with high ratings for ESG have outperformed the market.
Ultimately, the DBCCA report suggests that a best-in-class approach to investment which incorporates ESG analysis is a superior investment methodology.
Past performance is no guarantee of future results. Investing involves risk, including loss of principal. For information regarding the suitability of any investment for your portfolio, please contact your financial advisor.
* SRI = Sustainable, Responsible, Impact investing; CSR = Corporate Social Responsibility; ESG = integration and analysis of Environmental, Social, and Governance factors.
Posted: July 2, 2012