A remarkable transformation is underway in the corporate and investment world: an awareness among businesses and shareholders of the need to create a sustainable and resilient world, combined with a recognition that this can enhance, not detract from, long term portfolio returns. This is a significant opportunity for change, irrespective of the political forces that often seem to work in opposition to these interests, and is epitomised by the ability of the UN Sustainable Development Goals (SDGs) to capture the imagination of companies and investors.
The scope of the opportunity
The interest in long-term sustainability – for businesses and the planet – is indicative of a sea change in opinion on the role of environmental, social and governance (ESG) considerations in investment approaches.
No longer is it a case of portfolio managers arguing why they focus on ESG issues: they must now justify why they do not. For instance, to win an equity mandate from a European asset owner, a fund manager is expected to integrate ESG research into their investment process.