Global sustainable investment is not only the right thing to do for the planet, but it produces better returns as well, according to TD Asset Management vice-president and director Ari Levy.
At a seminar at the Suites at One King West in Toronto on Monday, he explained that the notion of socially responsible investing (SRI) being inferior to traditional means is no longer valid.
Levy provided data revealing that since its inception in 1999, the DJSI World Index has produced an investment return of 38.4%, outperformed the MSCI World Index by slightly more than five percentage points and added that ESG investing should be considered a global alternative. “The bottom line is this is a legitimate global opportunity to consider.”
While describing the difference between ethical versus sustainable investing, he pointed out that ethical investing was the first iteration of SRI, which focused on boycotts and ethical motivation, avoiding “sin” stocks and excluding industry groups with questionable social or environmental records. In comparison, sustainable investing focuses on positive environmental, social and governance (ESG) factors and adding shareholder value while including all industry groups and focusing on the best in class. Sustainable investing, according to Levy, is the natural evolution of SRI.
He defined sustainability as a broad spectrum of interests, including environmental responsibility, corporate best practices, human capital development, corporate citizenship/philanthropy, and a legacy to future generations, and explained that sustainability helps drive long-term profitability as companies have the ability to promote efficiency while meeting fiduciary obligations.
While emerging energy technologies such as solar and wind power were considered to be prohibitive from a cost perspective, Levy pointed out that these industries are rapidly changing and become more viable by the day. “On a cost-of-energy basis, technically they’re becoming competitive with the energy processes they’re seeking to either supplement or replace,” he said. “And that makes the business case much more compelling.”
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