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Portfolio > Mutual Funds > Equity Funds

Sustainable Investing: Growing Investor Acceptance

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Investors continue to embrace sustainability, according to the Forum for Sustainable and Responsible Investment. In “U.S. Sustainable, Responsible and Impact Investing Trends 2014,” the Washington, D.C.-based group points out that “U.S. sustainable, responsible and impact investing (SRI) has grown substantially over the past two years.”

Total U.S.-domiciled assets under management using SRI strategies expanded from $3.74 trillion in early-2012 to $6.57 trillion in early-2014, an increase of 76%, its research finds: “These assets now account for more than one out of every six dollars under professional management in the United States.”

Corporate executives are also getting on board. McKinsey Global Survey’s July 2014 study, “Sustainability’s Strategic Worth,” found that sustainability is becoming more important to corporate strategy.

“In past surveys, when asked about their companies’ reasons for pursuing sustainability, respondents most often cited cost cutting or reputation management. Now 43% (and the largest share) say their companies seek to align sustainability with their overall business goals, mission, or values — up from 30% who said so in 2012,” the report notes.

Brazilian electricity provider Cemig, for instance, is a component in sustainability indices, including the Dow Jones Sustainability Index (DJSI World), the ISE index of the BM&F Bovespa exchange and the MSCI Global Sustainability Indexes. The company also carries out studies involving identification of alternative scenarios and best practices, enabling it to identify the principal aspects that should guide the company’s strategy in relation to sustainability, says Luiz Fernando Rolla, Cemig’s chief corporate communications and institutional relations officer.

“Part of Cemig’s action in sustainability comprises its continuous efforts to make the company increasingly committed to the reality and demands of its environment,” he explains. “Allied with its vision, mission and values, Cemig creates shared value, uniting philanthropic and corporate-citizenship strategies with the objectives of its business, promoting economic and social development of the communities where it works.”

For instance, the firm launched its Fish Alive program in 2007 to conserve fish populations in river basins where it has hydroelectric plants, favoring the communities that use the water resources as a factor in their development. “The program operates on three fronts: conservation of fish populations and hydrographic basins, production of scientific knowledge to support these programs, and promotion of involvement of the community in the activities,” according to the Cemig spokesperson.

Defining the Opportunity

Taking care of the planet is an important objective, but many investors also want to be sure their sustainable investment returns are robust. In April 2015, the Morgan Stanley Institute for Sustainable Investing in New York released a study, “Sustainable Reality: Understanding the Performance of Sustainable Investment Strategies,” which examined the strategy’s results from 2007 through 2014.

“The study examined performance data from 10,228 open-end mutual funds and 2,874 separately managed accounts over the last seven years and found that investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is on both an absolute and a risk-adjusted basis, across asset classes and over time,” the institute explains.

The study’s results make a strong case for sustainable investing. For example, sustainable equity mutual funds “met or exceeded the median return of traditional equity funds for 64% of the time periods examined.”

These weren’t just short-term results: “Over the longest time period analyzed, the study finds sustainable equity funds met or exceeded median returns for five out of six different equity classes examined…,” it states.


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