Many people believe sustainable investing carries with it a trade-off. In other words, lower returns for the greater good.
However, the data shows otherwise - sustainable investing can outperform traditional investing.
Source: AMP Ethical investing research, May 2021²
Many companies that demonstrate better environmental, social and governance outcomes have outperformed those that don’t.
Be smart with your shareholders money, act responsibly, avoid controversy and profits should improve. Makes sense, right?
The recent global pandemic and resulting interruptions have shown that navigating uncertainty is more important now than it ever has been.
Companies that manage sustainable risk better tend to show lower downside risks and fewer bankruptcies.
The smart money
Supply and demand - there is a wave of investor money looking for sustainable investment opportunities.
This inflow will continue to drive demand for shares, bonds and other securities issued by ESG-minded companies.
Demand is one of many aspects that can drive value - the more demand there is, the higher prices may go.
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1: Returns chart - sources: BlackRock Investment Institute, with data from MSCI, November 2018.
Notes: The data covers May 31, 2012, to Nov. 30, 2018. Returns are annualized gross returns in U.S. dollar terms. Number of stocks, price-to-earnings ratio and dividend yield are monthly averages. Indexes used are the MSCI USA Index, MSCI World ex-U.S. Index, MSCI EM Index (“Traditional columns) and MSCI’s ESG-focused derivations of each (MSCI USA ESG Focus Index, MSCI World ex-U.S. Focus Index and MSCI Emerging Markets ESG Focus Index). The data shown prior to inception for each MSCI ESG Focus index (August 2016 for U.S.; March 2017 for World ex-U.S.; April 2016 for EM) are back tested. They are optimized to maximize ESG exposure within constraints (example: a tracking error of 50 basis points and maximum active weight of 2% for each index constituent for USA ESG Focus). Back tested performance is hypothetical, simulated and is not indicative of actual or future returns. Back tested performance is developed within the benefit of hindsight, has inherent limitations and invariably shows positive rates of return. ESG scores shown are average scores for each index based on MSCI data. See important notes on slide 52. It is not possible to invest directly in an index. Market indices such as those presented in the bar graph on this webpage track the performance of a collection of securities which represent a particular market or asset class. For example, the S&P/NZX50 Index is an index which tracks the performance of the top 50 companies in New Zealand. Indices are a useful way to measure who well or poorly a market or asset class has performed historically, but you should not rely on them to make your investment decisions. Remember that you do not invest in market indices – you invest in a fund which tracks indices (and often more than one).
2: Ethical Investing research May 2021 – BuzzChannel hosted an online survey between 13 April and 4 May 2021 with a sample of AMP KiwiSaver customers (n=679). Margin of error +/- 3.8%.
3: AMP-branded funds refers to funds with the prefix ‘AMP’ (except for the AMP Balanced Fund No. 3). These funds will be managed by AMP with support from BlackRock. The AMP Balanced Fund No. 3 will have no immediate change to its underlying investment mix, but it is proposed that, subject to approval by the AMP Investment Committee, the underlying assets of the AMP Balanced Fund No. 3 will transition to be managed by AMP with support from BlackRock Investment Management in the coming weeks. Funds with the prefix ‘AMP Capital’ will continue to be managed by AMP Capital. Refer to the product tables here to see which funds are adopting AMP’s sustainable investment approach. The 0.79% fee applies to AMP-branded funds, except for the AMP Cash Fund which has a lower fee of 0.59%, the AMP Default Fund which has an even lower fee of 0.39%, and except for the AMP Balanced Fund No. 3. Please consult the Product Disclosure Statement for the relevant product here for full details about applicable fees.
The information included on this website is of a general nature and does not constitute financial or other professional advice. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. For financial advice, we recommend you contact your Adviser. If you don’t have an Adviser, contact us on 0800 267 5494.
While care has been taken to ensure that the information in this communication is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission.
All forms of investment involve risk. None of AMP, The New Zealand Guardian Trust Company Limited or any other person or entity guarantees the performance of the AMP KiwiSaver Scheme (including the returns on that investment). Past performance is not indicative of future performance. Returns over different periods may differ.
AMP Wealth Management New Zealand Limited is the issuer and manager of the AMP KiwiSaver Scheme. For a copy of the AMP KiwiSaver Scheme Product Disclosure Statement and Fund Update Booklet, please visit amp.co.nz or contact Customer Services on 0800 267 5494.