New Data Highlights Investor Preference for Sustainable Companies
(3BL Media/Justmeans) – Sustainable investing is emerging as an important trend around the world. A growing number of investors now believe that a company’s sustainability performance is materially important to their investment decision-making. For investors, a company’s effective management of its ESG risks and opportunities can be an indicator that the company is a serious long-term player with a potential competitive advantage over others.
A recent survey conducted by the MIT Sloan Management Review and Boston Consulting Group has shown that as many as 90 percent of all professional investors agree at least partially that a company’s sustainability performance is vital to investors when making investment decisions. Seventy-three percent agree with this idea at least to a moderate extent, while 43 percent agree to a great extent.
Only three percent of investors entirely disagree that sustainability is linked to investment decisions. These results indicate widespread acceptance of the idea that corporate sustainability is linked to financial performance. Many of the investors cite reasons such as lower costs of capital, better operational performance, lower risk, and effective management in sustainable companies.
But the most oft-cited outcome, by 82 percent of respondents in the survey, was a company’s increased potential for long-term value creation when it focuses on sustainability.
The Morningstar Sustainability Ratings for funds also provide evidence of a link between long-term investing and sustainability performance. U.S.-based fund managers with longer-term horizons are twice as likely to have the highest Sustainability Ratings as the lowest.
A Sustainability Rating of High indicates that the companies held in a fund’s portfolio are better managing their ESG risks and opportunities than those held in at least 90 percent of portfolios in the same Morningstar Category. Managers with shorter-term horizons are more likely to have Low Sustainability Ratings than High.
For many mainstream investors, incorporating sustainability into their personal portfolios is more about aligning their investments with their values and a desire to have some impact on the transition to a more sustainable future.
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