Why every fund shouldn’t become sustainable | Foster Denovo
In this article, Trustnet asks if it is desirable for every fund to have a focus on sustainability and ESG factors, or whether there should always be room for investors who only want to make money.
According to global funds network Calastone, ESG funds “enjoyed phenomenal growth all year” in 2020, accounting for more than half of all the flows into active equity funds.
But while the industry’s direction of travel on this topic seems clear, will it be in everyone’s interests if every fund becomes aligned with sustainability? Should there always be space for funds that consider ESG risks, but only focus on financial returns? Is it right to deprive investors of the right to invest in morally-questionable industries such as tobacco and oil, etc?
Looking at the trajectory of the market today, Declan McAndrew, Head of Investment Research at Foster Denovo, said he thinks there will be a gradual migration to sustainability rather than a sudden switch away from ‘standard’ portfolios.
“I think it’s a nice ideal to make it mainstream. [But] the market moves gradually, and it has kicks and starts, as this will inevitably have as well. You think about the media coverage of climate change and societal inequality: that’s not in a niche 24-hour news channel, that’s the main bulletin so they’re much more front and centre to the public’s mind who have an obvious interest within that.”