Buy into sustainability

Sustainable investing considers all relevant social and environmental factors in order to better mitigate risks and identify opportunities.

Sustainable investing is our preferred solution

Sustainable investing considers all relevant social and environmental factors in order to better mitigate risks and identify opportunities. Increased government, business, and consumer emphasis on sustainability, combined with a growing investable opportunity set, means sustainable investing is now our preferred approach for investing globally.

Social and environmental issues can impact the economy and financial performance, as illustrated by numerous crises in recent years including wildfires and the coronavirus pandemic. Governments and businesses alike will place an increased emphasis on sustainability over the coming decade and beyond. The EU and Japan have announced pledges to be carbon neutral by 2050, and China by 2060. Meanwhile, plenty of businesses are changing their models to adapt to social and environmental challenges, as well as rapidly evolving consumer preferences.

All this has contributed to our decision to make sustainable investing our preferred approach for investing globally. Systematic consideration of all relevant environmental, social, and governance factors can help investors navigate uncertainty and position for the long term. Having already outperformed conventional investment strategies this year, sustainable strategies across all asset classes will play an even bigger role in a Decade of Transformation, in our view:

With the world shifting toward sustainability, many of the highest-growth opportunities in the decade ahead are set to be sustainability-related. For example, as we highlight in "The Next Big Thing", companies in the greentech space, ranging from battery electric vehicles to renewable energy, should benefit strongly from government regulation, recovery spending, and investment aimed at propelling a transformation from high- to low-carbon economies, and from improved marginal economics.

The pandemic has accelerated the shift toward a more local and resilient world, which could favor those environmental, social, and governance (ESG) leaders that have already taken steps to reduce their environmental footprint and strengthen their supply chain relationships. Companies that have openly embraced diversity and remote working are likelier to boost employee retention and attract talent in a post-pandemic world. Better ESG data means investors can increasingly customize portfolios by targeting the thematic or topic exposures that match their sustainability preferences.

Impact investing strategies target measurable positive social and environmental impact alongside market-rate financial returns. Investors have multiple options to add impact to their portfolios, including investing in private equity funds with an explicit sustainable development focus, such as the environment, healthcare, or renewables, or in engagement funds that help public companies achieve key sustainable outcomes, while benefiting commercially.