Schroders and the eternal dilemma: Is sustainable investment less profitable?

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“The short answer is no,” say this expert. Academic evidence shows that sustainable investing often does not detract from financial returns. But that doesn’t eliminate customer concerns. And the most nuanced answer is: it depends. Yes, sustainable investment approaches can improve risk-return profiles, through better risk management, better fundamental analysis and/or exposures to more favourable factors. But they can also harm risk-return profiles due to excessive reductions in the investment universe. It depends a lot on the objectives and methods used.”

Schramade adds that there is a lot of talk about sustainable investment approaches (exclusions, fundamental analysis integrating ESG factors, etc.) and the data used, and in fact there is much to discuss about it. But it would be a shame to skip the targets. As the Roman philosopher and statesman Seneca said, ‘If one does not know to which port one sails, no wind is favourable.’ Also in sustainable investment you have to know where you are going to really get there.”

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