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“Goodness is the only investment that never fails.”
Due to today’s market uncertainty, it may be an appropriate time to evaluate your portfolio. If you are looking more closely at aligning your portfolio with your principles, you may want to think about sustainable investing.
Sustainable investing is a broad term that describes how investors may align their portfolios with their principles; this can include an approach focused on environmental, social, and governance (ESG) criteria; impact investing; and/or socially responsible investing.
Our research indicates that investors do not need to forego return potential to align their portfolios with their values. On the contrary, a growing body of evidence suggests that financial performance of companies using ESG strategies is commensurate with that of those that do not. In fact, more than 90% of the 2,200 individual studies reviewed by the Journal of Sustainable Finance & Investment have shown a nonnegative relationship between ESG and corporate financial performance, with a majority of findings showing positive results.
This chart shows that, between 2015 and 2019, the MSCI All Country World Index, MSCI All Country World ESG Leaders Index, S&P 500 Index, and S&P 500 ESG Index all saw similar performance. In fact, the ESG-related indices outperformed the non-ESG indices in recent years.
Investor demand has been a key growth driver for sustainable investment strategies, and managers have risen to the challenge. Sustainable investment assets under management (AUM) have doubled since 2007. Additionally, 69% of investors would choose to use these types of investments in their retirement accounts if they were given the option to do so, according to the Wells Fargo/Gallup Investor Retirement Survey, February 2020.1
Between 1996 and 2019, both the amount of assets under management (AUM) in sustainable investment funds and the number of sustainable investment funds has steadily increased.
AUM (in billions)
Strategists at Wells Fargo Investment Institute recommend that investors interested in sustainable investing keep an eye on these four emerging trends.
Sustainable Investing: Investing with a purpose includes more information to help investors understand the opportunities with sustainable investing, including:
Wells Fargo Investment Institute is home to more than 120 investment professionals focused on investment strategy, asset allocation, portfolio management, and alternative investments. Its mission is to deliver timely, actionable advice that can help investors achieve their financial goals.
For additional insight and market commentary, visit our website. For assistance with your investment planning or to discuss the points in this report, please talk to your investment professional.
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