Does a sustainable approach improve investment outcomes?
What has become apparent in the research on ESG and sustainable returns is that investing for sustainable returns with an ESG approach does not sacrifice returns, or cost the investor more. A sustainable approach may indeed enhance both the risk and return sides of the investment coin. What has been the experience at Ausbil?
“We believe, and we have seen this play out in our sustainable investment portfolio, that a sustainable approach reduces investment risks in a material way,” says Nicholas Condoleon, Portfolio Manager of the Ausbil Active Sustainable Equity Fund and Head of Research. “It also improves outcomes, especially in downside markets where sustainable companies are rewarded for their lower overall risk profiles.”
It is crude to approach sustainable investing from a pure returns focus because the idea of sustainable investing is about risk-adjusted returns. This critical risk adjustment comes from an extensive tail of quantitative and qualitative data around ESG issues across multiple themes, improving the odds for investors in terms of both risk and rewards.
“We believe that ESG engagement can help deliver superior investment outcomes,” says Måns Carlsson, Head of ESG Research. Genuine engagement means maintaining an ongoing conversation with a large number of companies in the potential investment universe, even when they currently have un-investable ESG scores.
“We engage with companies for four key reasons,” says Carlsson. “Firstly, we want to protect invested capital. Secondly, we believe we can have a more positive impact on companies that are in dialogue with us, than if we simply exclude them as pariahs. Thirdly, we want all companies to become more sustainable in their journey, and increase the universe in which we can invest. And finally, we need to understand the full distribution of ESG outcomes and behaviours to get a full picture of both ends of the curve, those we would never invest in, and those we believe are exemplary on an ESG basis.”
“The theory is one thing, but experience is another. Since establishing Ausbil’s Active Sustainable Equity strategy, the application of deep ESG research has significantly improved the risk-adjusted performance of our sustainable portfolios,” says Condoleon. “We have seen this in examples of controversial and value-depletive companies we have avoided due to ESG research, and also in the avoidance of unforeseen risks that can be identified by an ESG approach, but are hard to quantify with traditional approaches.”
Click here for more information on how sustainable investing works hand-in-hand with deep ESG engagement, to deliver superior investment outcomes.
Disclaimer
Unless otherwise specified, any information contained in this publication is current as at the date of this report and is prepared by Ausbil Investment Management Limited (ABN 26 076 316 473 AFSL 229722) (Ausbil). Ausbil is the issuer of the Ausbil Active Sustainable Equity Fund (ARSN 623 141 784) (Fund). This report contains general information only and the information provided is factual only and does not constitute financial product advice. It does not take account of your individual objectives, financial situation or needs. Before acting on it, you should seek independent financial and tax advice about its appropriateness to your objectives, financial situation and needs. Securities and sectors mentioned in this monthly report are presented to illustrate companies and sectors in which the Fund has invested and should not be considered a recommendation to purchase, sell or hold any particular security. Holdings are subject to change daily. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance. Unless otherwise stated, performance figures are calculated net of fees and assume distributions are reinvested. Due to rounding the figures in the holdings, breakdowns may not add up to 100%. No guarantee or warranty is made as to the accuracy, adequacy or reliability of any statements, estimates, opinions or other information contained herein (any of which may change without notice) and should not be relied upon as a representation express or implied as to any future or current matter. You should consider the Product Disclosure Statement which is available at www.ausbil. com.au before acquiring or investing in the fund.
A short notice on the COVID-19 public health event, and how it can impact investments
Given the currently evolving issues around the Coronavirus (or Covid-19) globally, which has officially been designated a pandemic by the World Health Organisation, we wish to notify that, as with many firms, business may be disrupted. A public health crisis, pandemic, epidemic or outbreak of a contagious disease, such as the recent outbreak of Coronavirus (or Covid-19) in Australia, Italy, China, South Korea, the United States and other countries, could have an adverse impact on global, national and local economies, which in turn could negatively impact investment returns in any of Ausbil Investment Management Limited’s registered managed investment schemes (the Funds). Disruptions to commercial activity relating to the imposition of quarantines or travel restrictions (or more generally, an inability on behalf of authorities to contain this pandemic) may adversely impact any investment, including by delaying or causing supply chain disruptions or by causing staffing shortages. The outbreak of Coronavirus has contributed to, and may continue to contribute to, volatility in financial markets. The impact of a public health crisis such as the Coronavirus (or any future pandemic, epidemic or outbreak of a contagious disease) is difficult to predict, which presents material uncertainty and risk with respect to any investment or fund performance. You should consider the Product Disclosure Statement which is available at www.ausbil.com.au before acquiring or investing in the fund.
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