Sustainable Investing Drives Change by Embracing Slow and Steady
At Till Investors, we sometimes like to call sustainable investing “a new way to money.” It sounds like a marketing tagline – and I suppose it is – but it has a deeper meaning to us. In a world devoted to the fast buck, sustainable investing embraces the notion that slow and steady wins the race.
It’s easy to underestimate how revolutionary this is. The last several decades have been increasingly focused on the short-term – this quarter’s earnings, this month’s price gains, this morning’s internet news. Sustainable investing goes against the grain by asking companies to consider, and to report on, the medium and long-term impacts of their business decisions. It’s not possible to do so without investigating the roles that environmental, social, and governance considerations will play over time.
The vast majority of investment dollars are meant to achieve long-term goals, so it’s only logical to ask the companies you invest in to talk openly about sustainability. As we’ve made this argument to investors and discussed their experiences, we’ve learned that thinking long-term sometimes means taking a unique perspective. Here are a few examples ripped from the headlines.
1. Sustainable investing encourages support for new people to solve different problems.
This short LinkedIn post tells a remarkable story about how difficult it can be for funding to flow to women’s health research, and what kind of breakthroughs can happen when woman leaders get involved.
Context is important here. Is 23andme, the woman-led company referenced in the article, itself a great investment? Maybe, or maybe not. This is one reason we prefer diversified mutual funds when making sustainable investments. But when you exercise your interest in sustainable investing, regardless of the specific companies you invest in, you are registering your desire for money to be used in new ways – ways that may be better suited to long-term success.
2. Companies that aren’t sustainable are risky companies.
This 2022 Stewardship Report from Sands Capital Management articulates this point very clearly. “We believe that a company’s growth sustainability may be impaired when it fails to meet society’s expectations for responsible business practices. Such failures have been proven to adversely affect brand equity and consumer trust, which are inextricably linked to a company’s ability to create long-term shareowner value.”
Not all sustainable investment strategies are the same, and focusing on sustainability doesn’t guarantee you’ll avoid risk. But compared with strategies that don’t examine sustainable factors at all, sustainable funds do a more thorough job of identifying and managing risk. By investing in sustainable funds, you are insisting that this kind of risk evaluation is important to you as a long-term investor. That’s eye opening for a lot of leading investment managers and advisors.
3. Sustainable investing discourages corporate “truthiness.”
Most companies are in a constant state of competition, and frankly, lies help. Indeed, there is a lot of pressure on corporate leaders to fudge the truth – to gain funding, sell product, head off PR disasters, lobby governments, or avoid litigation. This LA Times story is just one recent example of the scale that corporate lying can reach.
For managers of traditional investing strategies, this kind of lying isn’t always viewed with concern. In fact, there’s an incentive to support company lying – or at least look the other way – if it benefits short-term performance.
This highlights one of the most impactful ways that sustainable investing strategies change the landscape: they screen for corporate lying. To be clear – there is no single standard for ESG data, and different sustainable managers have varying sets of criteria. But virtually all ESG standards in the governance category include some version of business ethics or anti-corruption.
The search for corporate honesty, transparency, and accountability is a big part of what draws us at Till Investors to sustainable investing, and we’re not alone. For us, it also casts an interesting and curious light on the supposed ESG backlash.
If you’re looking for ways to get started on your own sustainable investing path, we’ve got ways to help. Throughout our website you’ll find guidance and ideas. You’ll also be able to access our 2023 book on becoming a sustainable investor, and a set of Fund Profiles to help you find funds that are right for you. Or, just sign up for our newsletter at https://tillinvestors.com/reach-out. It’s the easiest way to demand better from the companies that shape your community.
