How Sustainable Investing Will Prosper in the Future

Good Money Week: Millennials are especially interested in investing ethically, which is likely to contribute to future the growth of the market

EdenTree 2 November, 2016 | 4:09PM

Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Esmé van Herwijnen, Responsible Investment Analyst, EdenTree Investment Management, explains the virtues of sustainable investing.

The ethical investment market, while increasing rapidly, is still only a very small part of the total market. However, the market has increased, with strong interest from both investors and consumers on the ethical credentials of companies. People are certainly more aware of business practices today and there is clearly a sense of mistrust of corporate behaviour – which has certainly contributed to increased demand for more responsible investment products. Millennials are especially interested in investing ethically, which is likely to contribute to future the growth of the market. Overall, the rapid pace of growth augurs well for ethical investment.

We believe good corporate citizens and companies contributing positively to society are more likely to perform well over the long term. Investing ethically also adds an additional layer of risk management. Climate change remains a key challenge not only for ethical investors, but mainstream funds are beginning to recognise the material impact carbon footprints have on the long-term investment performance of companies. Adequate sustainability performance is also a sign of positive long term focus and can contribute to the prevention of poor practices or misconduct. Reputation risk has become a key metric for company management – more so in the current age of social media, where even the smallest transgression can lead to a material impact on a company’s share price.

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EdenTree  is an investment management firm with a focus on ESG investing

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