Investors are increasingly taking ethical issues into account when considering their portfolios and the latest report from Colonial First State Global Asset Management (CFSGAM) shows there’s impact beyond financial returns.
Consideration of environmental, social and governance (ESG) factors, including pollution, employee safety, or remuneration, can provide greater transparency and also contribute to long-term financial performance, the CFSGAM 2018 Responsible Investment and Stewardship Report found.
The report showed that 75 per cent of the funds and 83 per cent of the assets managed by CFSGAM have outperformed their respective benchmarks over a rolling five-year period.
"At CFSGAM we believe climate breakdown has diverse, urgent and complex implications for investors and the companies we invest in. However, the current approach to assessing climate risk is not comprehensive enough," said Pablo Berrutti, CFSGAM Head of Responsible Investment Asia Pacific.
"Scenario analysis is complex and subjective. We believe it can miss significant risks and opportunities in portfolios and can, at times, be misleading."
Understanding the impact
The report highlights a variety of initiatives CFSGAM has made to better integrate ESG issues into its investment decisions.
Solving India’s plastic problem
CFSGAM business unit Stewart Investors Sustainable Funds Group has worked with the Institute for Sustainable Futures at the University of Technology Sydney (UTS) to bring attention to the issue of plastics pollution in India.
Having identified plastics pollution as an engagement priority for 2018, Stewart Investors and UTS hosted an interactive forum on 25 July 2018 in Mumbai with some of the largest local and multi-national consumer goods companies in India to explore solutions to the plastic problem.
The partnership identified a peak industry body is needed to focus purely on plastic packaging waste. This body will be tasked with exploring and progressing actions further.
More information on that initiative can be found here.
The full report can be viewed here.