By Jonas Borglin, CEO, The New Division
In September 2019 more than 45 CEO’s together with the UN Secretary-General launched the Principles for Responsible Banking. Already incorporating more than 130 banks from 49 countries, representing more than $47 trillion in assets,these Principles aim to provide the framework for a sustainable banking system, and help the industry to demonstrate how it makes a positive contribution to society.
It is the latest step forward by a finance sector that is rapidly gaining awareness of firstly how capital can be a driver for sustainable transformation, and secondly of how making more sustainable investments can be a significant source of competitive advantage for their funds.
Portfolio performance and investor demand
Partly this is an issue of portfolio performance,Fund managers need to mitigate the risk of being left with an investment that falls foul of increasingly stringent laws around environmental impact, supply chain conditions, performance in sustainability areas, and so on. However, for most the calculation ought to be around the greater value that investments in sustainable projects and organisations are likely to yield.
Recent research from Morningstar examined the net return of funds domiciled in Europe to see if this theory holds true in practice. It found that more than 34 per cent of sustainable funds appeared in the top quartile of their category in the year to June and about 63 per cent made it into the top half.
For retail funds an even greater impetus comes not from portfolio performance, but from investor…