Responsible investing is not only our privilege, it’s our duty

Future generations must be able to live on Earth. We’ve finally woken up to the fact that everyone can make choices for the better, and I’m happy that sustainable investing has become a new financial megatrend.

Studies show that finding purpose and value in work hinges on two things: the opportunity for self-fulfilment, and the opportunity to create something positive. I have been fortunate in this regard – responsible investing is a very important topic, and I’ve had the chance to discuss it with the media and audiences around Finland for many years now.

At first, the response was unenthusiastic. I vividly remember one event in 2015, when after my presentation a business magnate told me that responsible investing is an over hyped and pointless fad, which focuses on irrelevant details and will quickly be forgotten. This person was convinced that only key figures truly matter for the attractiveness of investment targets. However, strong disagreement was voiced by a younger generation of the family. The latter felt that a company’s attitude towards “softer values” like the environment, social responsibility, and good governance, have a substantial role in the company’s future chance of success.

Positive change and profits are not mutually exclusive

Now that several years and numerous speech events have passed, it is wonderful to see how responsible investing has become a popular theme, and how the discussion has evolved into deeper topics and better arguments. But it is even more wonderful to observe the shift from speculation to action. For example, according to Morningstar Investment Research Center, sustainable funds of European asset managers have accumulated a record-breaking €120 billion worth of new investments. Comparing this to the annual €20 billion in 2014–2016 shows a very fast growth rate. The availability of funds has also grown remarkably in Europe; last year alone, more than 360 new funds were launched in the sustainable category. If you want to be a responsible investor in 2020, the availability of investment targets is no longer an issue.

The work towards responsible investing has not been in vain. An ever-growing number of investors seem to have realised that their investment decisions have more wide-spread consequences, and that they have a chance to make a difference in what the world will look like in the future. If you view the UN 2030 Sustainable Development Agenda as a list of recommendations for investors, it just might be the easiest list to follow ever. By identifying companies that are top class in tackling challenges related to climate change, renewable energy, clean water, food, or ecosystems, for example, you’re also very likely identifying a profitable investment portfolio. That’s why I heartily recommend investors to familiarise themselves with the UN 2030 Agenda.

Big players should pave the way

The financial sector truly holds a key role in shaping the future. Our investment and funding decisions can steer the flow of capital into targets that promote sustainable development. Carl Cederschiöld, head of asset management at Handelsbanken, summarised corporate responsibility in banking by saying we are financial sector professionals but we also want to save the world.

Finally, to tie up the thread of our original anecdote: even the business magnate I met in 2015 has since realised the benefits of responsible investing. Generational differences in views on portfolio management are no longer as harsh and, would you know it – following the caring example of the younger generation, these portfolios have since grown at a stable rate while the risks have diminished.

This column is part of a series where Finance Finland member companies talk about responsibility in the financial sector.