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Let’s face it – change is constant. But let’s invest in a change that is sustainable, for all of our futures.
Here at Nebula Ventures, the team knows that seeking both high yielding and sustainable investment doesn’t have to be mutually exclusive. Sustainable investing is about honing in on the opportunities which support companies solving some of the world’s biggest challenges, but also offer above-market returns on investment.
It’s about taking ownership and control of our futures, by creating the momentum to drive more people to work towards a better future.
Let’s drive a positive, sustainable change for our world.
Sustainable investing is all about better decision-making; it’s a way to invest and seek the returns you expect, while staying true to your values. Once a niche field, it is progressing at a fast rate: about $30 trillion is already being deployed in private and public sustainable investments.
But, what is sustainable investing?
Sustainable Investing are types of investment strategies that range on a spectrum, starting with Exclusionary Screening or Social Responsible Investing (SRI), to the more active strategies including Environmental, Social and Governance (ESG) analysis, Thematic Investing and Impact Investing.
How do these strategies differ?
Exclusionary Screening/SRI is an investment strategy in which investors choose to exclude companies from their portfolio that they might find objectionable because the company fails to meet the investor’s standards or values (such as manufacturing tobacco or firearms).
ESG investing is the assessment of three sustainability factors (1. environmental; 2. social; and 3. governance) during the investment process to complement traditional financial analysis. These factors evaluate how companies are addressing environmental issues, resource constrains and societal needs.
Thematic Investing, like other forms of sustainable investing, allows you to support a specific environmental or social issue you care about while also pursuing investment returns, such as water scarcity or investing with a ‘gender lens’, to embrace efforts specific to women and girls.
Impact Investing is perhaps the most exciting of all sustainable investing strategies. It refers to investments that are made with the intention to generate a measurable social or environmental impact, alongside a financial return. Impact investing also occurs across asset classes, for example, private equity/venture capital, debt and fixed income.
Investors have turned their attention to sustainable investment opportunities and the trend is showing no signs of slowing. This is in part to do with the increasing evidence that sustainable investing can perform in line with, or exceed traditional investment portfolios.
Until recently, the most common sustainable investing strategy was Exclusionary Screening/SRI. But increasingly, sustainable investing strategies are being integrated as forms of risk analysis, such as through ESG and impact. Unlike the former approach to sustainable investing, these integrations take a proactive approach to assessing a company’s risks and opportunities to provide investors with the opportunity to allocate capital in line with their values.
According to the USSIF, by the end of 2017, investors using socially responsible criteria hit $12 trillion in U.S. assets.
Source: US SIF, Bloomberg
This year’s annual investor letter from Larry Fink (BlackRock CEO) drew global media sensation. Mr Fink called out climate change as a significant factor in evaluating a company’s financial outlook and issued a warning to the investment community that climate is going to reshape how we all think of an approach finance.
Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors. And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.
Key industry representatives in the financial sector are seeking more sustainable investment solutions.
Regulators and governments are placing an emphasis on the sector and incorporating sustainability into their investment decision making.
Fund managers see growth potential in the sector. Specifically, they are identifying opportunities where the Risk/Reward makes sense.
More emphasis is being placed on how climate issues will affect profits and revenues in the United States, and what companies are doing to address or mitigate those risks.
In April 2019, the Global Impact Investing Network (GIIN) reported that over 1,340 organizations manage USD502 billion in impact investing assets worldwide, intended to bring about positive change.
Although we agree with the GIIN’s suggestion that there is still reason to be optimistic, in order to meet the global social and environmental needs and challenges, much more capital will need to be unlocked for impact investing.
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