Inequality and climate change have created a challenging backdrop for companies, meaning a failure to incorporate these principles will provide a poor return for investors.
This claim was made by Jessica Ground, global head of stewardship for Schroders, who said it was vital to think about environmental, sustainable and governance (ESG) investing in terms of "risk and return".
"We see it as the third dimension of investing. If you are going to be successful in allocating capital on a forward-looking way, then you are going to need to take ESG into account, and to hold these companies to account."
According to data from the S&P 500, the average tenure of a company has fallen from 50 years to 15. This means that companies operating with a view to long-term sustainability will be those who last the course.
Ms Ground added it was "so important" investors do not just use a tick-box approach to ESG. She said: "Investors should focus on digging into the numbers and on the material issues.
"For example, it is less important if a newspaper has a climate change policy, but it is very important that a mining company has one.
"Making sure you are focusing on the material issues and what the company is doing in practice is vital. To do ESG well in a way that helps investment returns, you have to be prepared to do fundamental analysis."
Ms Ground, who has more than 20 years' experience of investing, said it was clear firms operating on strong ESG principles make better long-term holdings.
"I know for a fact that companies which are managing these risks well do make better long-term investments", she added.
This is as important for individual investors as it is for institutional investors, but at any level, engagement is crucial to help drive change, she said.
Ms Ground also told FTAdviser that Schroders is focusing in particular on seven of the 17 UN Sustainable Development Goals (SDGs), which are being implemented by 2030.
"For example, one of the goals is on bribery and corruption. We have been doing a lot of work globally to make sure the companies in which we invest have robust [anti-bribery and corruption] policies and are monitoring their business behaviour.
"We have a huge role to play in policy and encouraging better practices."
Ms Ground added it was important to know one cannot solve all 17 of the problems highlighted by the UN's SDGs, but by focusing on a few, she said "we can hope to move the needle".
Earlier this month (October), research showed advised clients are increasingly seeking ethical investments, particularly clients aged between 25 and 34.
In a survey of 1,500 UK adults, carried out by Atomik Research and commissioned by Rathbone Greenbank Investments, 18 per cent of respondents wanted to put more ethical investments into their pension pots.