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Analysis shows the ‘superior performance’ of sustainable investment



Investing your money sustainably – in companies and funds that take into account the planet, its people and prosperity – reaps a 15% better return than a benchmark index, according to a study by a German rating agency.

Oekom Research looked at companies in its Prime Portfolio Large Caps (PPLC) – a group of 300 major firms with sustainability accreditations – over a seven-year period between 2004 and 2011, and compared their performance against the MSCI World Total Return Index.

The results are encouraging. After being weighted by market capitalisation, the PPLC displayed a 30.9% cumulative return on investment. Over the same timescale, the MSCI World achieved 26.8%. This 4.1 percentage point difference equates to a 15.3% higher return for the PPLC.

And if the two indexes were to be given equal weight, the PPLC’s return on investment shoots up to 62.84% – more than double the MSCI World’s.

The results of the study confirm our hypothesis that sustainability performance is a good indicator of companies’ overall performance and that investors would be well advised to incorporate this indicator into their decision-making processes”, said Robert Hassler, CEO of Oekom research.

The superior performance was not achieved at the cost of higher risk; on the contrary, the annual risk of Oekom’s Prime Portfolio Large Caps was actually slightly lower than that of the MSCI World Index.”

The Oekom study is the latest in a long list of similarly promising pieces of research in the sustainable investment field.

Last month, compelling” evidence found by DB Climate Change Advisors, Deutsche Bank’s climate change research arm, detailed how companies that factor sustainability into their investments perform better on the stock market and offer investors less risk.

The findings were drawn up after analysis of over 100 academic studies – 89% of which displayed evidence for “market-based outperformance” for companies that had high ratings for environmental, social and corporate governance (ESG) and corporate social responsibility (CSR).

Meanwhile, a report called Gateways to Impact, conducted by six large organisations including the Calvert Foundation and the Rockefeller Foundation, found that the sustainable investment sector in the US has a market potential of $650 billion, and that 69% of financial advisers see it as a growth opportunity for their practice.

Over in Europe, the scale of the sector is already thriving. In May, the Association of Luxembourg Fund Industry found that over £100 billion are invested in more than 1,200 responsible investment funds throughout the continent.

This trio of studies, on top of the recent Oekom report, proves that more and more companies and individuals are looking to sustainable investment to make good returns whilst doing social, moral and ethical good.

Blue & Green Tomorrow’s Guide to Sustainable Investment delves into the sector further, speaking to some of the leading lights in the industry to get a clear picture of its path.

Further reading:

Investing sustainably is a ‘clear win’ says study

Survey reveals promising trends for sustainable investment

Study highlights scale of Europe’s responsible investment

The Guide to Sustainable Investment