Global Investor Study

Profit vs impact: investors choose sustainability for better returns

A major new study shows people are more likely to back sustainable investing for better returns, as to create a positive social impact.

28/09/2017

David Brett

David Brett

Investment Writer

Sustainable investing has long been regarded as more of a philanthropic pursuit, putting positive impact ahead of making a profit. But a major new study shows investor attitudes may be shifting.

The 2017 Schroders Global Investor Study of 22,100 people who invest across 30 countries found the majority of them view sustainable investing as a way to generate profits and not just potential positive impact.

The chart below shows investors’ average responses when asked about how they invested in six different types of sustainable funds or ways of investing:

  • Medical science/biotech.
  • Green technology.
  • Avoiding oil, gas or coal companies.
  • Positive social impact.
  • Improving how companies are run.
  • Improving diversity.

They were asked whether they invested in them for potential profit versus positive social and/or environmental impact.

Investors were given a scale between one - for positive impact - and five - for profit. A score above 3.0 meant investors lent more towards profit. The responses for all six fund types were close to 3.0, as shown in the chart below.

The average across all six was 2.9. This meant investors were equally likely to choose sustainable investing as a path to better potential returns as for the impact it might generate on the world.

How investors back sustainability for better returns

Jessica Ground, Global Head of Sustainability, said:

“Investors understand the impact that issues like strong corporate governance and diversity can have in generating profits.

“These views are backed up by research. MSCI, for example, shows companies in its World Index with high proportions of female leadership generate a higher return on equity – 10.1% a year, versus 7.4% for those without significant female representation on their boards.

"In a similar vein, a study by consultants McKinsey called ‘Why Diversity Matters’ found ethnically diverse companies were 35% more likely to outperform their peers.

“Our own research shows we are beginning to see more investors approach sustainability as a profitability question rather than an altruistic one.

“This is to be welcomed. Social and environmental change is happening faster than ever. The challenges posed by climate change, inequality and demographics are sizeable.

"Those companies able to adapt and thrive will continue to benefit disproportionately, while others will fall further behind. Investors increasingly recognise this.”

Important Information: Schroders commissioned Research Plus Ltd to conduct, between 1st and 30th June 2017, an independent online study of 22,100 investors in 30 countries around the world, including Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines ‘investors’ as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last ten years. These individuals represent the views of investors in each country included in the study.

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Opinions, estimates and projections in this article constitute the current judgement of the author as of the date of this article. They do not necessarily reflect the opinions of Schroder Investment Management Australia Limited, ABN 22 000 443 274, AFS Licence 226473 ("Schroders") or any member of the Schroders Group and are subject to change without notice. In preparing this document, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this article. Except insofar as liability under any statute cannot be excluded, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this article or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this article or any other person. This document does not contain, and should not be relied on as containing any investment, accounting, legal or tax advice. Schroders may record and monitor telephone calls for security, training and compliance purposes.