There is a deeply ingrained notion among individual investors that you can't make as much return on capital if your investment decisions are based on sustainability or social benefit metrics. This conventional wisdom persists, despite the fact that a majority of investors say they would prefer to invest in sustainable or socially responsible companies.
So, I was interested in the November 2015 presentation by an investment professional who challenged these assumptions. Audrey Choi is CEO of Morgan Stanley's Institute for Sustainable Investing. She is also Managing Director and Head of Morgan Stanley's Global Sustainable Finance Group. In these roles, she oversees the firm's efforts to support resilient communities and promote economic opportunity and global sustainability through the capital markets.
As part of her role at Morgan Stanley, she commissioned a poll of a thousand individual investors. She found that overwhelmingly, people wanted to add sustainability and social responsibility to their investing formula. Yet, 54 percent of the people still said if they put their money in those kinds of stocks, they thought that they would make less money.
But when Morgan Stanley looked at the hard numbers, they found the long-term performance of more sustainable businesses outperformed conventional equities by a nearly 2-1 margin.
Now, let's be clear, they didn't make that outperformance by giving away money to seem like a nice corporate citizen. They did it by focusing on the things that matter to their business."
Some good food for thought for investors, and the businesses that are seeking them.
Video Source: TED Conferences
-- Bruno Roche