By Tim Clipstone
Until recently, ethical investing was seen as an expensive fad, sacrificing returns for principles. However, the fad has not gone away. In fact it seems to be gaining in validity and attracting increasing amounts of investment capital. There is also mounting evidence that investing in companies that are actively working to improve the environment and society and those that are operating according to good governance principles (collectively called ESG investments) over the long term is actually producing returns which match more traditional strategies in ‘sin stocks’ such as companies producing tobacco, guns and alcohol.
Many mainstream banks and large fund managers now have an ESG investment strategy platform, including JP Morgan, PIMCO, Blackrock, Bank of America and Morgan Stanley and asset allocations have followed. According to the Global Sustainable Investment Alliance 3rd report there were $22 trillion of assets managed under responsible investing strategies globally in 2016, which was up 25% from 2014. According to JP Morgan, the majority of this investment has been in the bond market and over half of ESG investments are managed in Europe. Separately, JP Morgan has seen the AUM of global ESG ETFs increase from $4.97 billion in January 2016 to $11 billion AUM in global ESG ETFs by mid-2017, suggesting the growth in such strategies is continuing apace.