Decades ago, exclusionary screening emerged as a way for investors to opt out of contributing to industries they found objectionable, such as tobacco, adult entertainment or weapons. Emerging now as the logical next step is sustainable investing, a much sought-after strategy that allows investors not only to rule out certain companies, but to purposefully invest in those making a positive impact in the world.
Often referred to as ESG investing for the criteria on which companies are evaluated – environmental, social and governance – sustainable investing considers that progress toward solving global challenges such as climate change, social inequality and unethical business practices can be made by investing in companies and enterprises that promote sustainability.
Through sustainable investing, not only can investors aim to make a positive impact on society and the environment, they also can potentially improve the risk/return characteristics of their portfolios by factoring ESG criteria into their investment decisions.*
Risk mitigation – Through adherence to ESG principles, companies potentially mitigate regulatory and governance risks.
Impact – A more conscious approach can help investors make a positive impact while potentially avoiding ties to questionable business practices.
Long-term performance – There is growing evidence that integrating ESG principles into the investment process has the potential to positively impact risk-adjusted performance.*
$8.7 trillion Sustainable investing assets in the United States more than doubled from 2012 to the start of 2016.
$1 in every $5 Assets under management using sustainable, responsible and impact strategies accounted for more than one out of every five dollars under professional management in the United States in 2016.
40% Increase in number of funds incorporating ESG criteria from 2012 to 2016.
Source: U.S. SIF Foundation, Report on U.S. Sustainable, Responsible and Impact Investing Trends, 2014 and 2016.
* This investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations and could result in either underperformance or outperformance of the market as a whole.
Asset allocation and diversification do not ensure a profit or protect against a loss. All investing involves risk. There is no assurance that any investment strategy will be successful or that any securities transaction, holdings, sectors, or allocations discussed will be profitable. Strategies discussed are subject to change at any time by Asset Management Services due to market conditions or opportunities. The foregoing content reflects the opinions of Raymond James Asset Management Services and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security outside of a managed account. This should not be considered forward looking, and is not a guarantee of future performance of any investment.
