Avoiding the Noise around Sustainable Investing? It's Time to Take a Second Look 1

Sustainable investing: growing at a 12% CAGR

According to the Global Sustainable Investment Review 2016, global sustainable investments have been growing at a 12% compounded annual growth rate. Total assets under sustainable investing were up 25% between 2014 and 2016. They hit the $22.9 trillion mark at the beginning of 2016. The US alone has witnessed a 135% rise in assets under management using sustainable investing criteria since 2012. According to a Bank of America Merrill Lynch (BOA) research, 93% of US Millennials show a high preference for impact investing.

Sustainable investing seems to be in vogue with asset managers

Sustainable investing also seems to be in vogue with asset managers.

  • Fidelity Investments recently launched two low-cost index funds focused on sustainable investing. These are the US Sustainability Index Fund and the International Sustainability Index Fund. Fidelity already has an actively managed ESG fund, the Environment & Alternative Energy Portfolio.
  • Morgan Stanley (MS) raised $125 million for its first global impact fund, the PMF Integro Fund 1. “The Fund epitomizes our belief as a firm that there are opportunities for investors of all types to pursue both positive financial return and sustainable impact,” said James Gorman, chairman and CEO, Morgan Stanley.
  • The Aberdeen Multi-Manager Ethical Portfolio focuses on ethical investments.

Sustainable investing: Daewoo Bus Service Pakistan

Frontera recently spoke to Mattias Martinsson, Chief Investment Officer of Tundra Fonder, who stated, “Two of Tundra’s investment analysts are focused exclusively on ESG [environmental, social, and governance] analysis.” Since August 2015, the fund manager has been engaged in sustainable investing through its Sustainable Frontier Fund and beginning this year all funds are screened for norm-based violations.

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In September 2016, Tundra Fonder bought 9.4% of Daewoo Bus Services, a Pakistani logistics company.  The investment is part of Tundra Fonder’s foray into sustainable investing. The service aims to provide safe and comfortable transportation in Pakistan (PAK). The company is expected to be listed in July 2017 at the Pakistan Stock Exchange.

According to Martinsson, factors that should serve as tailwinds for Tundra’s Daewoo Express project are:

  1. The transportation sector should benefit from the infrastructure upswing expected in the economy
  2. Rising disposable income
  3. The pressing need for safe transportation in the country

Our recent article series, ESG Analysis: The Best & Worst Emerging Markets, sheds light on growing importance of ESG analysis to emerging market (EEM) (VWO) investors. It also highlights the leaders and laggards on the ESG scorecard.

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