22 Nov - Ethical investing can offer comparable returns with lower risk – Appian Asset Management
Ethical investing can offer comparable returns with lower risk – Appian Asset Management
- Socially responsible investing (SRI) can match conventional investment portfolios without the same level of volatility
- SRI funds are generating strong and growing interest from investors
- SRI funds now close to 20% of all professionally managed assets in the US and growing quickly in Europe
Tuesday 22nd November 2016 – Ethical investing can offer returns that are comparable to conventional investment portfolios but they can do so with lower risk, according to Appian Asset Management.
Appian Head of Investment Strategy Eugene Kiernan said the performance of socially responsible investing (SRI) funds in recent years has shown that these funds are capable of matching more conventional investment funds.
“SRI is making much more financial sense in recent years,” said Mr Kiernan. “When SRI first emerged, investors tended to accept that they had to forego a portion of returns relative to other forms of investment – but that is no longer the case.”
Mr Kiernan said SRI returns are now matching – and in some cases exceeding – investment portfolios that do not contain ethical screening of stocks and other investments.
But he added SRI funds tend to be less volatile than other funds. “This means investors can get comparable returns without taking on the same level of risk,” he said.
However, Mr Kiernan also said that government bonds, which have traditionally been popular among SRI funds and have been seen as a safe haven, now offer increasing potential for negative returns.
“Bonds have provided superior returns to investors but over the past 5 years these returns have been exceptional. There are limits to the support that Central Banks can offer through their bond-buying programmes and we have reduced our exposure to bonds accordingly”.
SRI funds becoming more popular among investors
Mr Kiernan also said ethical funds are gaining significant traction within the broader investment community and are no longer confined to limited categories of investor. He said:
- There have been significant interest in and investment flows into this sector
- In the US, close to 20% of all professionally managed assets are now in SRI funds
- In Europe, SRI funds are growing at a faster rate than mainstream assets
- Millennials (people born in the 1980s and reached adulthood in 2000 or later) are showing significant interest in SRI issues, which in turn is influencing the growth of these funds
Mr Kiernan was speaking at a conference for charities and not-for-profit investment groups which took place in Dublin’s Merrion Hotel today.
Speakers at the conference, entitled “Charities – Building Success in a Changing Landscape” and co-hosted by Appian and financial advisory firm Mazars, included representatives from charities and professional advisory firms.