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The term ‘sustainable investing’ describes investments that aim to produce positive returns, and a positive long-term impact on society, the environment and the overall performance of a business. In line with this, some asset managers began including ESG (environmental, social, and governance) factors in their company analysis a few years back. Here’s a breakdown of what each of these pillars comprises of:

Environmental factors

  • Emissions and pollution
  • Raw material sourcing
  • Supply chain management

Social factors

  • Community relations
  • Customer satisfaction
  • Safety practices

Governance factors

  • Board structure
  • Management incentive structures
  • Shareholder rights
  • Capital allocation

According to a paper from McKinsey and the World Economic Forum, it’s clear that changing climate conditions and nature loss are closely linked. There’s also an increasing commitment from the private sector to look at ways to reduce their collective carbon footprint.

Looking beyond the COVID-19 pandemic, there’s a consensus that curbing greenhouse-gas emissions and protecting the natural environment is critical to an overall global economic recovery.

According to the World Economic Forum’s 2021 Global Risk Report, extreme weather, climate action failure and human environmental damage are rated as the top risks, most likely to happen and with the most material impact.

How are companies responding?

While the pandemic has brought challenges and suffering, it has also caused people to be more aware of how they live, what they consume and how they allocate their spending, and companies are taking note. Overall, we’re increasingly seeing companies proactively taking steps to improve the sustainability of their operations.

The new generation seeks sustainable investments

Millennials care more about sustainability than previous generations did. According to the World Economic Forum, they are twice as likely to invest in companies with ESG goals; an overwhelming majority want sustainable investing as an option on their retirement plans; three-quarters believe investments can influence change; and 84% believe it can alleviate poverty.

Much has been said about the upcoming wealth transfer. Over the next two decades, baby boomers in the US will transfer at least USD30 trillion in wealth to the next generation. This has vast implications for sustainable investing and for investment managers, and financial advisers too.

What about performance?

Despite the increased attention, sustainable investing still has a way to go to become mainstream – particularly in South Africa. This is largely due to incorrect perceptions that there has to be a trade-off between performance and sustainability.

“Despite the increased attention, sustainable investing still has a way to go to become mainstream – particularly in South Africa. This is largely due to incorrect perceptions that there has to be a trade-off between performance and sustainability.”

In a 2019 study, Morgan Stanley noted that 8 out of 10 respondents were interested in investing sustainably, but that just over half were doing so. These figures are higher when it comes to millennials. 95% of millennials were interested in sustainable investing and 67% were actually going ahead with those investments.

This trend will likely increase at a quicker pace once the pandemic settles, and as investors become more aware of, and interested in, how companies fare in the ESG measurement categories.

Francis Marais, Head of Glacier Research, says that sustainable investing is about creating long-term sustainable value for companies, consumers and investors, as well as the environment. “Understandably, someone drawing a retirement income is going to be more focused on higher returns, whereas a younger investor who is a lot further away from retirement is likely to be more focused on the environment,” he says. “But it doesn’t have to be a trade-off – sustainable investing can also deliver good returns.”

How you can invest and contribute to global development

Glacier’s Sustainable World Enhancer allows you to grow your capital while contributing to global sustainable development goals (SDGs) at the same time.

It is a five-year, tax-efficient, structured investment that provides the certainty of capital protection, and is set up in the Glacier Vantage Plan (a sinking fund policy underwritten by Sanlam Life Insurance Limited).

The investment caters to investors’ changing demands. At its core are the ESG factors that are the solutions to the problems we face. It is available for investment during set periods throughout the year. Contact your financial adviser for more information about investing in the fund. Don’t have a financial adviser? Get in touch with one today.

Visit the Glacier Insights blog to read the latest brochures or to watch a video on the Solactive Sustainable Development Goals World RC 8 EUR Index.

Sources:

Water: A human & business priority, McKinsey Quarterly on McKinsey.com, 5 May 2020 – By Thomas Hundertmark, Kun Lueck and Brent Packer.

The coronavirus downturn has highlighted a growing investment opportunity – and millennials love it, CNBC.com, 15 April 2020.

Glacier Financial Solutions (Pty) Ltd and Sanlam Life Insurance Ltd are licensed financial services providers. The Glacier Sustainable World Enhancer is set up in a sinking fund policy underwritten by Sanlam Life Insurance Limited.

 

 

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