ESG offers returns as well as altruism, says PortfolioMetrix
Having just achieved a four-year track record, data from portfolios run by investment manager PortfolioMetrix shows sustainable investing can provide a serious option for investors who want to do their bit for people and the planet without compromising potential returns.
PortfolioMetrix offers risk-rated portfolios under the heading ‘Sustainable World', these portfolios having launched on 24 January 2017. The highest risk portfolio achieved 52 per cent (11.1 per cent annualised) over the four-year period - higher than global equities and with slightly lower volatility. This equated to a risk-adjusted return (Sharpe Ratio) of 0.83 over the period, despite an allocation of over 27 per cent to UK equities, which have struggled over the same time-frame. Lower risk Sustainable World portfolios achieved even stronger Sharpe Ratios - up to 0.97.
Nic Spicer, UK Head of Investments at PortfolioMetrix, says: "The performance of our Sustainable World portfolios has been predominantly driven by strong underlying fund performance. Globally there has been a real shift towards companies that seek to provide solutions to the world's problems, a shift that has also been reflected in their share prices. It's exactly these sorts of companies that the funds that make up the Sustainable World portfolios seek to identify and invest in."
Renamed Sustainable World from Ethical Emphasis in 2020, the aim of the portfolios is to meet clients' financial goals whilst also explicitly helping drive positive social and environment change. They invest in funds that:
• Focus on companies that deliver a clear positive net benefit to society and the environment.
• Focus on sustainability of product, service and operations when selecting companies to invest in.
• Seek to improve the behaviour of the companies they invest in through engagement.
• Exclude industries and specific companies with negative social or environmental impacts.
Spicer says: "During 2020 interest in ESG investing went through the roof and many investment managers raced to launch products to meet demand. Back in 2016, when we started work on our offering, we joined a much smaller group of investors who were passionate about what purpose-driven investing could achieve for people and the planet.
"It's gratifying to see what strong financial returns can be achieved from investing in these sorts of portfolios, but it's even more thrilling to see the positive impact clients can achieve whilst doing so."