Positive link between responsible investing
and financial performance
17 November 2009
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.”
