For more than 30 years, Invesco Ltd has been associated with responsible investing. Our constant goal is to help people bring their values to investing while also seeking to provide the returns people need to reach their financial objectives.
Trends in ESG
In U.S. assets under management that use ESG screening.¹
of Millennials would rather invest in companies that have a positive social or environmental impact.²
of advisors believe high-net worth investors will demand ESG strategies in their portfolios.³
Investing spectrums for ESG approach
ESG approaches range from impact investments that target a specific goal like gender equality to negatively screened portfolios that avoid certain industries like tobacco or firearms. Integrated portfolios consider ESG principles broadly and specifically when evaluating securities.
Source: Invesco Ltd. For illustrative purposes only.
Reality: Positive financial results can correlate with ESG approach
It’s hard to claim that any given investment strategy will always underperform. Morgan Stanley analyzed 10,723 funds, using Morningstar data on exchange-traded and open-ended mutual funds active in any given year from 2004-2018. They found that there is no financial tradeoff in the returns of sustainable funds and traditional funds.⁴
MYTH: Is ESG approach a passing fad and too much of a niche strategy.
Reality: ESG approach is not new. ESG approach is here to stay and options are growing in number and size.
As we are on the cusp of an intergenerational wealth transfer, the role of younger investors becomes increasingly important when considering future interest. A recent global poll of 1,125 millennials found that 77% said that ESG investing is their top priority when considering investment opportunities.⁵
MYTH: ESG investing approach unduly limits the investment universe
Reality: There’s more than one way to approach ESG issues.
While some strategies will exclude large swaths of investable universe, others may impose relatively limited sector exclusions, and invest in companies with best-in-class ESG scores within their sectors. The latter approach to view ESG scores as a sign of risk mitigation, which may have a positive impact on financial performance.
1 US SIF Foundation Report on US Sustainable, Responsible and Impact Investing Trends, 2018 (most recent issue of biannual report).
2 The Cerulli Report: Environmental, Social and Governance Investing, 2019.
3 The Cerulli Report: Environmental, Social and Governance Investing, 2019.
4 Morgan Stanley Institute for Sustainable Investing (2019) Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds.
5 DeVere Group (2020) 8 out of 10 millennials now prioritize responsible investing.
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