Investing Responsibly Is For Everyone’s Benefit

By Gontse Tsatsi, Head of Retail Clients, Old Mutual Investment Group

Gontse Tsatsi, Head of Retail Clients, Old Mutual Investment Group

ESG investing – which stands for “environmental, social, and governance” – is an investment philosophy that encourages people to do more with their investments than just make more money. It recognises that finance doesn’t operate within a vacuum and encourages investors to keep environmental, social and governance factors top of mind when deciding which companies to invest their money in.  

While the idea of responsible investing has always existed, ESG became a more conscious, official philosophy with the introduction of the United Nations-backed Principles for Responsible Investment (UN-PRI) guidelines.

ESG means looking deeper than the bottom line when evaluating whether a company is a worthwhile investment, by asking questions like, how well do they treat their staff and the communities they do business in? How transparent are they around issues like shareholder rights and executive pay? What is the impact of their business on the environment – and what measures have they put in place to lower their environmental footprint?

ESG investing is an acknowledgement that the decisions we make around which companies to support and grow will have wider-reaching consequences than our own financial returns. That being said, adopting an ESG investment philosophy does not mean forgoing financial returns.

Win-Win Situation

Investing in the planet and investing for financial returns are both long-term investments in a better future. What’s more, the two are not mutually exclusive.

One can never guarantee returns with any type of investment, but one can make educated projections based on past performance, and the data around ESG investing are more favourable than critics might expect.

The financial performance of companies with higher ESG scores has proven to be better than those with low ESG scores. What’s more, companies with high ESG scores have shown resilience during times of crisis – during the Covid-19 market crash in 2020 companies with high ESG scores delivered better returns than those with low ESG scores.

Amplifying our Impact 

Leverage is a term that’s often used in financial circles when it comes to maximising financial returns. By choosing to be more intentional around our investments, we can use the principle of leverage to maximise the positive impact that we, as individuals, can have on the planet as well.

When we choose to switch to a more sustainable investment philosophy, we’re joining forces with millions of other conscious investors around the world and compounding our efforts. It’s through that kind of global mass action that we, as individuals, can drive real, lasting change on a big scale.

In addition, for our ESG funds as well as the rest of our range we steward the listed equity assets we manage, diligently exercising our voting rights and actively engage with companies’ management teams. We also partner with industry bodies to promote regulation that drives green economy growth.

At Old Mutual Investment Group, we offer ESG funds to individual investors. For as little as R500 a month, investors can amplify their impact. We launched the first retail focused ESG index funds in 2018, and an ESG Equity fund in 2020 which remains the only active ESG fund focusing on South African assets with good ESG scores. We currently manage six responsible investment funds available to retail investors; these are the Old Mutual MSCI World ESG Index Feeder Fund, Old Mutual MSCI Emerging Markets ESG Index Feeder Fund, Old Mutual ESG Equity Fund, Old Mutual Albaraka Equity Fund, Old Mutual Albaraka Balanced Fund, and Old Mutual Albaraka Income Fund. Go to https://www.oldmutualinvest.com/individual/our-solutions/esg-funds/ for more information.

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