Economy

Why we’re supporting Sustainable September: Alliance Trust Investments

Published

10 years ago

June 6, 2014

Blue & Green Tomorrow

Several organisations are helping us organise and underwrite Sustainable September, the month-long celebration of sustainability that you can reserve your tickets for now, before they go on general sale.

We are asking each of them to tell us why they are supporting the event. Next is Alliance Trust Investments, which manages a range of investment funds under the banner Sustainable Future.

Why is Alliance Trust supporting Sustainable September?

It has become clear that one of the main contributors to the financial crisis was a culture of short-term thinking, from which we are only just starting to recover. It led to pressure on companies to focus solely on short-term shareholder value, sometimes at the expense of other stakeholders (such as customers or broader society) and putting at risk longer-term returns.

Sustainable investors have long known that it is important to take into account more than just the immediate context of a company’s quarterly results. Increasingly, more people are coming to realise that the environmental, social and governance (ESG) issues are not just about ideals – they are about value as well. You only need to consider the recent floods in the UK, the furore over how much company bosses get paid or the fallout from last year’s horsemeat scandal to realise that these ESG factors can have a serious impact on the profits of the companies in which you invest.

Sustainable September is there to highlight the importance of these issues, with valuable insights from thought leaders, investors, corporations and entrepreneurs from across the country. As a company, Alliance Trust wants to be at the forefront of this movement towards a more sustainable future.

What do you hope to get out of the event?

We hope that Sustainable September will push sustainability to the front of people’s minds and help to take a step toward changing people’s perceptions, particularly in relation to sustainable investing.

Currently, the most popular criticism of sustainable investing is that it means sacrificing returns. This is increasingly becoming untenable; indeed, Moneyfacts pointed out last year that ethical funds have outperformed their non-ethical counterparts over one year and three years, while sustainability issues are becoming more and more embedded in mainstream investment.

The factors that have brought this about are only going to become more important in the years to come, meaning that companies that operate more sustainably will be better investments in the long-term than those that don’t. It seems clear that sustainable investing is here to stay.

What does sustainability mean to you?

We believe that there are three key elements encompassed within sustainability.

– Positive impact – there are many companies which are a real force for good. They help to improve quality of life, reduce environmental impact and manage their operations responsibly and with integrity. It may be a firm that makes technologies that lower carbon emissions, one that improves people’s lives through medical innovation or one that helps provide clean water. Companies with products or services that provide these solutions to the challenge of developing more sustainability are likely to grow more than the market and where these positive attributes are overlooked by the market can be good investments.

– Avoiding negatives – sustainable investing means not investing in companies whose activities damage the environment or have a negative social impact. As well as avoiding such firms, we believe that actively encouraging companies to change and improve their practices is an important part of sustainable and responsible investment (SRI). This process is called ‘engagement’.

– Real investment potential – we firmly believe that sustainable investing is a sensible approach from a pure investment perspective. Companies operating in a sustainable and responsible manner are better placed to succeed over the long-term.

Why should individuals and businesses consider sustainability?

There are a whole host of different factors making it more important for investors to take sustainability issues into account. As the world economy becomes increasingly globalised, a growing population and an emerging middle class in developing economies, which is clamouring for the good things in life, are colliding with limits to growth including food shortages, resource scarcity and environmental degradation.

On top of this, we are all having to deal with the impacts of extreme weather events, whether that is droughts in prime crop-growing areas in the US and Eastern Europe or floods at home and across Europe. These are becoming more frequent and more intense, with scientists increasingly certain that man-made climate change is behind these alterations to our weather patterns.

At the same time, ‘top down’ pressures are occurring. These are pressures from the other end of the economic chain – from us as consumers. In our connected world, people are now more aware of the impacts of their own actions – and the impact of the companies whose products they buy.

And now, social media allows people to do something about it and hold companies to stricter standards than they have in the past. That means businesses that are perceived to be acting in an irresponsible manner will be punished for it – recent examples include the demise of the News of the World, forced to shut in the wake of phone hacking revelations, and BP, which is still suffering the after-effects of the oil spill at one of its wells in the Gulf of Mexico.

It’s not just consumers and investors who are more aware of all of these issues – politicians and regulators are, too. Companies and shareholders have to consider not just the factors highlighted above but also how regulators and policymakers deal with them.

Academic studies support the view that more sustainable companies are more likely to be successful. A recent paper from the Harvard Business Review found that “high sustainability firms outperform low sustainability firms in both stock market as well as accounting performnance“.

Follow Sustainable September on Twitter (@SustSept), Facebook (facebook.com/sustsept) and through the dedicated LinkedIn group.