Economic, social and governance (ESG) investing, once predominantly the realm of activist investors, is now high on many retail and institutional investors' radars.
And for good reason.
Incorporating ESG into your investment considerations not only puts your money to work in more responsible ways, it can also see your returns given a healthy boost.
That's according to the latest research from Mercer, a global leader in responsible investment advice and solutions, and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC).
Mercer's research revealed that the best sustainable investment strategies in Australian shares returned 10.4% annually over the last 3 years through to June 2020. Over that same time, the median actively managed Aussie equities fund returned 5.3%, while the S&P/ASX 300 Index (ASX: XKO) returned 5.2%.
In other words, the ESG strategy roughly doubled the annual returns.
100% ESG in 2 years
That potential boost in returns will surely come as good news to the philanthropic Myer Foundation. The Myer Foundation, established in 1959, aims to achieve a 100% ESG investment portfolio by November 2022.
The Foundation set the ambitious goal last November. And in March this year it commissioned Mercer's Responsible Investment business to help restructure its portfolio.
Martyn Myer, who led the transition and stepped down as president earlier this month after 11 years in the role said:
Shared Value posits that corporate success and improved social and environmental conditions are in fact inherently linked – and when achieved together, they can dramatically enhance future prosperity.
The SDGs [United Nation's Sustainable Development Goals] provide a clear pathway to address social, economic and environmental challenges and with 193 nations committed to achieving them, it signals broad global consensus, creating a powerful economic tailwind for aligned companies.
Helga Birgden, Partner, Global Business Leader of Mercer's Responsible Investment remarked:
Through this project, Mercer has worked with The Myer Foundation to identify the best investment managers globally that we expect to deliver strong investment returns while contributing to solutions to sustainability challenges and a positive impact on the environment and local communities.
While not all responsible investment or ESG funds will outperform over all periods, as long-term investors focused both on returns and truly sustainable investment solutions, rigorous investment and operational due diligence is critical for manager selection.
Myer added that the Myer Foundation is now in a position to help change the attitude that companies need to choose between delivering competitive returns to shareholders and doing good.
As Mercer's latest research reveals, they can do both.
