Why sustainable investing matters

It’s not just consumers and investors who are more aware of all of these issues – politicians and regulators are, too. Companies and shareholders have to consider not just the factors highlighted above but also how regulators and policymakers deal with them.

Academic studies support the view that more sustainable companies are more likely to be successful. A recent paper from the Harvard Business Review found that ‘high sustainability firms outperform low sustainability firms in both stock market as well as accounting performnance’ [Eccles Iannis, Serafeim, 2013]

As a result, the major criticism of sustainable investing – that it meant sacrificing returns – is increasingly untenable. Indeed, Moneyfacts pointed out last year that ethical funds have outperformed their non-ethical counterparts over one year and three years, while sustainability issues are becoming more and more embedded in mainstream investment.

The factors that have brought this about are only going to become more important in the years to come, meaning that companies that operate more sustainably will be better investments in the long term than those that don’t. It seems clear that sustainable investing is here to stay.

More information on Alliance Trust Investments Sustainable Future range

SRI hub

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Position on sustainability and ethical issues

Past performance is not a guide to future performance. Investments can go down as well as up. Investors may get back less than they originally invested.

Funds which undertake ethical screening to meet their investment aims are unable to invest in certain sectors and companies. Our exclusion of some areas of the market (on ESG grounds) may result in periods of underperformance with respect to relevant benchmarks. For instance, if tobacco stocks were enjoying extremely strong returns we would not be able to participate in their gains.

This article is for investment professionals only. It is not to be distributed to or relied upon by private investors.

Alliance Trust Investments Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC330862, registered office, 8 West Marketgait, Dundee DD1 1QN; is authorised and regulated by the Financial Conduct Authority, firm reference number 479764. Alliance Trust Investments gives no financial or investment advice.