Investment Trend Sustainable Investing Part 2
In the Trends 2019 I gave you the basic features yesterday in the first part Sustainable Investing.
This is no longer an exotic theme. But on the contrary! Sustainable investment is booming. The volume of sustainable (or responsible) investments worldwide is estimated at over $ 80 billion, with high growth rates still in place. In the German-speaking region (Germany, Austria, Switzerland), the sum of assets invested according to sustainable criteria has increased tenfold since 2005. Nevertheless, Germany still has some catching up to do in this respect. What sounds negative at first, but means nothing else than: In this country, the boom is still ahead!
What about the return?
Not everyone will want to use their money to support sustainable products and projects, and to cut back on security and yield. In the case of long-term capital investment (for example, to build up assets or in the context of private pensions), the benefits of sustainability for the investor are still clear: Anyone who plans to hold a stock for several decades should welcome a sustainable corporate strategy that is based on long-term preservation. The longer the investment horizon, the more the investor should consider sustainable aspects. Not for moral reasons, but out of pure self-interest. Studies have shown that sustainable investments often did better!
Long-term studies by renowned institutes, such as the Harvard Business School, found that the return on sustainable investments was a good four percentage points above the overall market. A study by the University of Oxford (From the Stockholder tothe Stakeholder) certifies that sustainable investments offer higher returns with lower risk.
And a meta-study, a study summarizing many studies on this topic, found that 90% of the studies come to a similar conclusion. This trend is likely to intensify as more and more investors, including private ones, demand sustainability. And the climate debate will seriously challenge the value of investments in coal, oil and gas, while investors in renewable energy can even benefit from it.
The conversion of the economy and above all of the energy production in the sense of a clear reduction of the carbon consumption is so crucial for the coming decades that even a separate term was coined for it: Decarbonization. Wide range of investment opportunities But sustainability goes far beyond environmental goals like reducing CO2. The range of sustainable investing includes all companies and sectors that contribute to the durability of our (human) society, for example, by engaging in health, education, social justice, good working conditions or transparent decision-making structures. In the medium and long term you will have great success with sustainable investments. Even for you as a shareholder sustainable companies are interesting. Because in the medium to long term, they are more successful than companies who only squint on short-term profit maximization.