Invest Sustainably for Long Term Returns

Many of the world’s largest companies are now explicitly considering sustainability as part of their long-term business strategies

Jon Hale 29 December, 2016 | 1:12PM

It has been a little over six months since we launched the Morningstar Sustainability Rating for funds, a portfolio-based measure of how well the companies in a fund’s portfolio are addressing the Environmental, Social, and Governance (ESG) issues they face in their businesses. We created the rating because of the rapid growth of interest in the field from the investing mainstream, and because investors who wish to incorporate sustainable investing into their portfolios need a tool to help them evaluate, select and monitor funds.

Many of the world’s largest companies are now explicitly considering sustainability as part of their long-term business strategies. In addition, a growing body of research suggests correlations between better company ESG performance and higher-quality management, higher growth and lower cost of capital. Evidence of positive investor outcomes from sustainable investing are also reported.

As a result, more investors want – and need – insight into the sustainability performance of the companies in fund portfolios because it makes sense to consider these factors from a material, financial standpoint. Of course, many investors also want to align their portfolios with their preference for companies that treat the environment and their workers well, produce safe and useful products, and govern themselves with transparency and a long-term view.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Jon Hale  Jon Hale is a consultant with Morningstar Institutional Investment Consulting.

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