Sustainable investments are standing up. Throughout the recent market carnage, data from Morningstar shows investment funds targeting companies that care about the environment, society and good governance have outperformed those that don’t. Thus, it seems, sustainable investment is living up to all definitions of the term.
Here at New Money, we’ve known for a while that sustainable investments aren’t just about doing the ‘right’ thing: it could also make you more money in the long-run. We saw proof of this time and time again in our analysis of the pension fund market for The New Money Pension Manual: sustainable funds perform better over time.
This is no surprise, really. Sustainable funds invest in businesses that treat their employees fairly and focus on long-term sustainable goals. It seems logical that these types of business will have a better future. If our planet is to survive its current climate catastrophe, then fossil fuel giants no longer have a place here. Meanwhile, businesses that can help us find a way out – such as renewable energy providers and electric car manufacturers – will prosper. It’s a no-brainer.
Sustainable investments, sustainable returns
But don’t just take our word for it. There is a growing body of research out there showing that sustainable investments do better. Another study published by data provider Morningstar found that around two thirds of sustainable funds beat the average fund in their category.
Sustainable funds did particularly well in 2018 when main markets were choppy, too, because sustainable companies are usually not as volatile. This holds true across global markets: another Morningstar study found that sustainable American funds outperformed the wider market, while research by asset manager BlackRock has shown that indices which took into account ESG factors were the winners in emerging markets too.
BlackRock also found that companies which reduced their carbon footprint every year did better financially than those that lagged behind. So, you see: this isn’t about altruism. This is a wake-up call to each and every one of us that wants our money to pay for a long and happy retirement.
Pick up that phone, dial your pension provider, and start that conversation today. In decades to come, when you kick back to enjoy your retirement on a living planet, you’ll be glad you did. *Risk warning: The value of investments can go down as well as up and you may lose all of your capital.
Risk warning: Past performance is not a guarantee of future performance.