Trustnet Magazine 56 November 2019 | Page 20

Your portfolio 20 / 21 [ SUSTAINABILITY] The evidence in favour of ESG investing as a driver of returns is now irrefutable, says Rebecca Jones. Here she explains why The greater good O ver the past half-decade, numerous studies have emerged showing that funds, indices and companies that pay attention to and take positive action on environmental, social and governance (ESG) factors outperform those that don’t. Reports from Morgan Stanley and Morningstar show sustainable funds consistently match and often beat the returns of main market competitors; other studies from MSCI and BlackRock indicate ESG indices also have an edge. Meanwhile, academic papers from Oxford University and Harvard conclude companies that pay attention to ESG are rewarded by stronger and less volatile share prices. The evidence is becoming undeniable. “There is now a huge body of evidence that shows how ESG outperforms,” says Edward Lees, fund manager at BNP Paribas. “The TRUSTNET ‘E’ part in particular is now giving a clear alpha signal, particularly since 2009. Meta studies increasingly show 3 to 5 per cent outperformance as areas like solar have got more competitive.” Future-proofing While the performance benefits are clear, this rush to sustainability is now being driven predominantly by risk management. When NEST announced its intention to divest from tobacco in August, it claimed While the performance benefits are clear, this rush to sustainability is now being driven predominantly by risk management trustnet.com