Investment Management House Janus Henderson recently published some thought pieces on ESG and Socially Responsible Investing. Please see the key takeaways from these pieces below:
Sustainable equities: the future is green and digital
- The pandemic has accelerated investment into digitalisation, which we consider to be a key enabler of sustainability.
- We expect support for sustainable development to gain momentum as countries embrace the need to be low carbon and as Joe Biden takes his seat in the White House.
- Investment into electric vehicles is expected to surge in 2021 as innovators ‘race’ to the top.
Sustainable design in consumer products
- The apparel sector is well known for its detrimental effects on the environment. However, as consumers become more aware of their own environmental footprints, there has been a surge in demand for sustainable goods.
- A circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.
- Companies including Nike, Adidas and DS Smith have incorporated a circular approach to the design and production of their goods, creating durable and long-lasting products with a reduced environmental footprint.
Investing in Diversity: analysing the investment risks and opportunities
- Companies are increasingly being held accountable by consumers who reward brands aligned with their values.
- For many global businesses, matters of diversity and inclusion go beyond the workplace, and efforts are made to address discrimination in the countries in which they operate.
- Investors should be wary of companies that fail to futureproof themselves in terms of diversity. Socially conscious brands that make inclusivity a central part of their business strategy and brand ethos are more likely to succeed.
- What gets measured, gets improved. Investors should focus on company disclosure, diversity-related targets, and meaningful initiatives in place. A list of suggested investor questions can be found at the end of this paper.
Janus Henderson are ahead of the game with ESG policies and started factoring this in back in 1991 shortly following the 1987 United Nations Report, ‘Our Common Future’ which I mentioned recently in an ESG blog. Their philosophy is below;
‘We believe there is a strong link between sustainable development, innovation and long term compounding growth.
Our investment framework seeks to invest in companies that have a positive impact on the environment and society, while at the same time helping us stay on the right side of disruption.
We believe this approach will provide clients with a persistent return source, deliver future compound growth and help mitigate downside risk.’
As I wrote about in our blog, as a firm we undertake regular due diligence with regards to the investments we recommend to our clients. This an ongoing process and we are constantly monitoring the market, and this year ESG has become a key factor in what we look for in the due diligence process.
Of course, many businesses may have a broad and generic ESG statement, but having a strong and well defined ESG process embedded into a businesses culture and investment process is definitely one of our key determining factors in the companies we choose to recommend.
We start off with an investment houses ESG statement, but then we dig deeper, to make sure these investments do exactly what they say they do, in terms of ESG, then factor this into the rest of our research i.e. investment returns, track records, cost etc.
It’s good to see so many investment houses now openly talking about and promoting ESG and demonstrating their views and philosophies.
Now could be a great time to invest whilst asset prices are still generally low, all whilst taking a responsible approach to investing!
As always, keep checking back for a variety of blog content from a wide range of investment houses, fund managers and our own original pieces.
Andrew Lloyd
04/12/2020