A recent report (March 2015) from Morgan Stanley found that there is a positive relationship between corporate investment in sustainability and stock price and operational performance. We are not surprised by this result.
We strongly believe that companies that take environmental, social and governance issues seriously are inherently in a better position to prosper than those that don't, because these factors can have a very real effect on the value of a stock.
The report focuses on the US market, and found that 64% of sustainable equity mutual funds had equal or higher median returns and equal or lower volatility than traditional funds over seven years. This reinforces our beliefs and provides evidence that integrating sustainability into the investment process does not hinder performance, a myth which is still commonly believed.
So how do the Alliance Trust Sustainable Future funds compare?
We believe in comparing our funds to mainstream benchmarks - that includes mainstream Investment Association peer groups in order to present our performance in a clear way and so that we can stand up to our bold claims.
We also take the long-term view. Investing should be done in a responsible way, and that means holding on for the long term, which is why we look at three- and five-year performance in the table below. As you will see over three and five years, the majority of our funds have outperformed their peer group.
Net cumulative performance as at 31/03/2015. Share class 1. Source FE.
Past performance is not a guide to future performance.
So how is it that investing in companies with fewer impacts on the environment and products which improve quality of life yields better outcomes? Surely there should be a trade off between ‘being good' and ‘making money'?
We believe not. Indeed companies which are better for society should experience greater support from society, either through buying more of their product, or through Government regulation or fiscal measures. Conversely companies operating against the interests of society will face headwinds of regulation and consumer preference.
Of course this is not the only metric that matters. This sustainability analysis has to be combined with rigorous analysis of business fundamentals and valuation. However it is an important, and often overlooked, metric in identifying higher quality companies likely to experience strong growth.
Wealth generation for our clients can proceed hand in hand with generating broader sustainable prosperity. This is what the Sustainable Future fund range aims to achieve.
Discrete performance
Source FE as at 31/03/2015. Past performance is not a guide to future performance.
Important information
Please note the value of investments and any income from them can go down as well as up. Investors' capital is at risk and they may not get back what they originally invested. Funds which undertake ethical screening to meet their investment aims are unable to invest in certain sectors and companies.
