17/11/2009
By Sophie Baker
Responsible Investment does have an impact on financial performance, reports Mercer, with specific environmental, social and corporate governance (ESG) factors affecting portfolio returns positively.
Academic research, Shedding Light on Responsible Investment: Approaches, Returns and Impacts shows that of 16 academic studies, ten show a positive relationship between ESG factors and companies' financial performance, four show a neutral relationship, and two show a neutral to negative one.
"The idea that responsible investment does not have to come to a cost to performance is becoming well established in the institutional investment industry," commented Tim Gardener, global chief investment officer for Mercer's investment consulting business. "In fact, the 'Shedding Light' report further builds the already strong case that considering ESG factors can add real and measurable value to an investment portfolio."
The reports also show that the understanding of the concept of responsible investment is a broad one, with a number of tools available for integrating ESG factors into the investment process, such as voting, engagement, collaboration, negative and positive screening and ESG integration into valuation metrics.
Jane Ambachtsheer, global head of responsible investment at Mercer, added that the growing interest in responsible investment comes from regulatory changes which provide further reassurance about the link between ESG, fiduciary duty and public awareness. "As these trends strengthen, we can expect to see continued improvement in the area of ESG integration by institutional investors and increased academic and industry focus on its impact on performance."
