ASK THE EXPERTS

CAZENOVE CAPITAL’S PETER HILLIER JOINS US TO ANSWER A QUESTION ABOUT HOW INVESTMENTS CAN HAVE A POSITIVE IMPACT

HOW CAN I USE MY INVESTMENTS TO MAKE A DIFFERENCE?

ANSWER: Individual investors increasingly want their investments to contribute to better outcomes for people and the planet, while also achieving their long-term financial objectives. Such an approach is often described as ‘sustainable’ investment; companies that consider all of their stakeholders, including the environment and society, are likely to be better positioned for the long term. We believe that sustainable investment makes good financial sense.

There is plenty of research to support this. The latest evidence comes from a study published earlier this year by the Swiss Finance Institute. It looked at the performance of some 700 funds that had signed up to the UN’s Principles of Responsible Investment (‘UNPRI’) – a network of investors who are working to promote sustainable investment – and compared them to funds that hadn’t. The study found that although being a UNPRI signatory didn’t necessarily lead to outperformance, in most cases the signatory funds had lower volatility. In other words, investors get similar returns – but with less risk. There are many ways to approach sustainable investment.

One method involves ‘screening’ – excluding harmful industries such as tobacco and gambling. A drawback of this approach, however, is that investors have less opportunity to positively influence the companies in question.

A different approach involves investing in companies that can demonstrate their positive impact. This typically means looking for companies whose products and services respond to environmental or social challenges. Our approach involves sustainable portfolios designed to meet a wide range of investment objectives. The underlying companies within these portfolios generate roughly half the carbon emissions and six times the social benefit of companies within the MSCI World equity index.

*This article is for information purposes only and should not be interpreted as investment advice.