Responsible investment: Debunking the myth

March 2021

As an investor, you probably want your investments to have a positive, sustainable impact. Maybe you're considering responsible investment, but you're worried it'll be less profitable than traditional types of investment. At Desjardins Global Asset Management, we're here to tell you that's a myth.

Here are 3 reasons why, taken from our white paper.

But first, a definition.

What is responsible investment?

Responsible investment (RI) involves choosing companies to invest in based on whether they follow environmental, social and governance (ESG) best practices.

For instance, ESG-conscious companies might promote:

  • Renewable energy use
  • Occupational health and safety
  • Diversity on their board of directors

Institutional investors view RI more favourably

According to a 2018 EY survey of institutional investors, basing investment decisions on ESG criteria doesn't diminish returns. In fact, from 2017 to 2018, investors' opinions of responsible investment improved.

Specifically, in 2017, 38% of investors would have immediately ruled out a company with a risk or history of poor governance practices. In 2018, that proportion increased to 63%.

Also covered in our white paper: 8 ESG factors that influence investors' decisions

ESG best practices can lead to improved performance

Why are more and more companies choosing to invest responsibly? Our white paper highlights 2 reasons.

  • By incorporating ESG factors into the security selection and asset allocation process, portfolio managers can identify risks and investment opportunities that are sometimes overlooked in traditional financial analysis.

  • Companies that follow ESG best practices tend to:

    • Be more profitable
    • Pay higher dividends
    • Have lower residual risks and less systemic volatility

    Results of a study led by MSCI from 2007 to 2017.

Also covered in our white paper: 3 examples of how ESG criteria affect performance

Socially conscious companies are more resilient in times of crisis

COVID-19 has brought about a period of uncertainty. How did this impact companies' performance in the first half of 2020?

According to an analysis by J.P. Morgan Wealth Management, companies with higher ESG scores outperformed other companies.

Also covered in our white paper: a graph showing the performance of ESG-conscious companies over the first half of 2020

Want to learn more about responsible investment and our approach?

Read our white paper on RI (PDF, 935 KB) - External link. This link will open in a new window.

Share

See all articles

  1. Source: Does your nonfinancial reporting tell your value creation story?, EY, 2018.
  2. Source: Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance, MSCI, July2019.
  3. Source: Sustainable investing in the spotlight, J.P. Morgan Wealth Management, July2020.

The information in this article is for illustrative purposes only. It should not be considered as investment advice, as a recommendation to buy or sell securities or as a suggested investment strategy.