During the last years we have witnessed the growing interest and greater sensitivity on the part of society towards issues related to the care of the environment and concern for social issues. So much so, that this same trend has been reflected in the investment world, where exponential growth has been recorded in what is known as Socially Responsible Investment (SRI), or Sustainable Investment. According to data from Spainsif, in the last five years the heritage in sustainable strategies in Europe has grown by more than 30%. And it is that we could affirm that the 2015-2020 period has marked a before and after for Sustainable Investment as a consequence of the different political commitments –Paris Agreement and 2030 Agenda for Sustainable Development–, legislative –Plan of Action on Sustainable Finance of the European Commission–, and economic –Green Pact and NextGeneration EU– that have had place.
SRI is defined as that type of investment that takes into account, in one way or another, the so-called ESG criteria: environmental, social and governance. However, within the universe of Sustainable Investment, we can find a wide range of strategies ranging from the most traditional based on the exclusion of controversial activities or sectors, to the most innovative such as Impact Investment, which seeks to generate, in addition to a financial return, a positive environmental or social impact, through investment in companies that are capable of aligning their business objectives with a mission committed to the environment or society.
One of the main advantages offered by the integration of ESG factors in investment analysis and decision making is the better and greater control of risks. The evaluation of the extra-financial criteria allows knowing the exposure and quality of the management of a company in relation to its environmental practices (A), working conditions of employees (S), or degree of transparency in corporate governance (G ), among other. These elements, if not managed properly, can have a negative impact on the evolution and development of the business, and therefore ultimately affect the behavior of our investments.
A reflection of this has been the evolution that sustainable investments have had during the crisis caused by Covid-19 compared to traditional investments. A study by Afi shows that Investments with a more robust ESG profile show a higher degree of resilience to high uncertainty events such as the current Covid-19 crisis, thus achieving, record more contained falls. But not only that, the study also contributes to demystify the belief about the lower potential for revaluation of sustainable investment, and that is that, since the lows at the end of March, the recovery of SRI strategies has been in line with traditional investments , even being higher in some cases. In this sense, and taking into account the significant growth of assets under management in ESG strategies in the last year, it seems that the crisis caused by the pandemic has only consolidated the role of SRI in the investment field.
Therefore, we can affirm that the future of sustainable investing is promising: regulation, investor sensitivity and evidence of a better evolution of these assets will sooner or later make all investments have some component of sustainability. Whether with an ethical-moral or financial objective, sustainable investment is here, and it will be gaining prominence in the portfolios of the Spanish investor.
Claudia Antuña is an investment analyst at Afi and an expert in socially responsible investment