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The concept of sustainable investing has really taken hold over the past few years and is now seen as a key part of any well-planned portfolio.
The objective, of course, is to direct a reasonable proportion of available funds into areas and initiatives which will mitigate climate change and improve the lives and livelihoods of people around the world in ways which reflect the best ESG (environmental, social and governance) principles.
Accordingly, leading wealth managers and their clients have been taking a much closer look at the actual and expected impact of different types of investment. They know priorities must shift as examples of the detrimental effects of climate crisis continue to multiply. But they are also aware that, by putting their money to work in the right way, they can be part of the solution and still make a decent return on their investments.
“In fact, we believe ESG integration strategies may lead to outperformance over the long term,” says Juan Aronna, Royal Bank of Canada’s (RBC) managing director and head of investment solutions and products for wealth management Asia and wealth management international. “It will create value not only for the environment and communities, but also for the investors supporting these initiatives.”
To emphasise the point, he notes the findings of a recent report by consultancy firm McKinsey which mentioned that around 63 per cent of roughly 2,000 academic studies found a positive relationship between ESG integration and financial performance, when measured by equity returns.
Even more significantly, latest estimates indicate that more than a third of worldwide assets under management (AUM) are now being managed in line with sustainable, or responsible, investing principles. Sources at Bloomberg Intelligence suggest the total value of such assets are on track to exceed US$50 trillion by 2025, up from US$22.8 trillion in 2016, and that is based on the conservative…
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