The truth about sustainable investing

The truth about sustainable investing

Last year, Sanlam Investments committed itself to the purpose of delivering the best possible outcomes for the planet, its people, and the clients who choose to invest with us. While interest in sustainable investing is growing every day, some misconceptions about it have lingered since it came into public consciousness decades ago. There are a few myths that need debunking promptly, so we can get to the truth about sustainable investing.

Sustainable investing avoids unnecessary risks, which supports performance

Perhaps the biggest myth is the idea that using environmental, social and governance (ESG) factors in investment processes hurts performance. In fact, there is now plenty of evidence showing that using sustainable investing strategies helps you avoid unnecessary risks (leading to smaller and less frequent capital losses) while not losing out on opportunities (that have the potential to enhance returns).

Sustainable investing is about so much more than being ‘green’

Another pervasive myth is that sustainability is only about green issues. While the environment remains important, ESG means focusing on social and governance factors as well. Indeed, the ‘S’ and the ‘G’ can be much more important for some companies than the ‘E’. As we slowly start to recover from the initial impact of the Covid-19 pandemic on our society, the ‘S’ has enjoyed renewed emphasis as previous societal injustices, especially in South African society, have deteriorated and become worse.

All age groups support the concept of sustainable investing

Meanwhile, a very 21st century misconception is that only millennials are interested in sustainability. While, it is true that younger people are likely to believe in it more than their parents or grandparents, research shows that all age groups support the concept.

There is an abundance of data to enable sustainable investing

Debunking these myths requires hard facts, which has generated a myth in itself: that there is not enough data out there to prove that it works. In fact, the real problem here has been that there is too much data, creating an analysis industry of its own to enable investors to make sense of it all.

These are some of the most common myths. There are more, ranging from ‘sustainable investing only works with equities’ to ‘sustainable investing does not work in emerging markets’.

Being able to separate fact from fiction is increasingly important in a world of ‘fake news’ and misinformation, so armed with the facts you will now be able to take steps towards better informed decision making.

The video below separates fact and fiction around sustainable investing.