Spotlight on Sustainable Returns
5 min readNo trade-off between value versus values
The market swings over the past few years have demonstrated the importance of a sustainable investing approach. With the crash and rebound brought on by the pandemic, followed by a sustained bull run, sustainable strategies have showed their value in all market conditions, adding value to investors’ portfolios and demonstrating protection from risk.
Research is showing that indexes made up of companies focused on ESG issues, climate change and the transition to a low-carbon economy outperformed and can act as a defensive characteristic in times of crisis1, in addition to their ability to generate outperformance in growing markets1.
A focus on good stewardship and sustainable investing practices may help investors mitigate the risks associated with market downturns, as well as find opportunities in more bullish environments. Effective research, analysis and evaluation of ESG issues may enhance the value and performance of an investment over the medium and longer-term.
Investors are increasingly seeking ways to meet their financial goals while contributing to positive environmental, social and governance outcomes. No longer considered a “niche” investment, sustainability has gone mainstream and hasn’t resulted in a trade-off between value and values. In 2020, 42 per cent of sustainable funds were ranked in the top quartile of performance, and 33 per cent were ranked in the second quartile of performance2.
Sustainable Equity Funds: 2020 Return Rank by Morningstar Category Quartile
Why AGF’s Sustainable Investment Platform
In addition to the integration of ESG considerations across our investment platforms, AGF’s Sustainable Investing Platform offers a spectrum of solutions specifically aimed at achieving sustainable outcomes for investors through exclusionary screens, explicit ESG factor incorporation, thematic and impact approaches.
AGF Global Sustainable Equity Strategy
An active, fundamental approach to sustainable returns
Sustainability isn’t just about exclusion or managing the risk of climate change in portfolios. The AGF Global Sustainable Equity Strategy invests in four sustainable themes, identifying innovative companies within each theme: Health and Well Being, Water and Wastewater Solutions, Waste Management and Pollution Control and Energy & Power Technologies.
Under these four broad themes, we look to identify sub-themes where there are clear drivers and catalysts for growth, analyzing the market conditions and building a picture of the investment opportunities. We then conduct ESG and fundamental analysis to build a high-conviction sustainable portfolio.
The strategy offers one of the longest track records in sustainable investing (launched in 1991) and invests in global equity securities with a primary focus on providing investors long-term capital appreciation within the four themes. It has demonstrated persistent outperformance over its long-term history3 and can be a source of alpha when used in a portfolio.
1Source: Morningstar Inc. February 2021: https://www.morningstar.com/insights/2021/02/08/morningstars-esg-indexes-have-outperformed-and-protected-on-the-downside
2Source: Morningstar Inc. January 2021: https://www.morningstar.com/articles/1017056/sustainable-equity-funds-outperform-traditional-peers-in-2020
3Source: AGF Investment Operations as at March 31, 2021
You cannot invest directly in an index.
The commentaries contained herein are provided as a general source of information based on information available as of May 19, 2021. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. The content intends to provide you with general information and is not intended to be comprehensive investment advice applicable to the circumstances of the individual. We strongly recommend you consult with a financial advisor prior to making any investment decisions.
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AGF Management Limited (“AGF”), a Canadian reporting issuer, is an independent firm composed of wholly owned globally diverse asset management firms. AGF’s investment management subsidiaries include AGF Investments Inc. (“AGFI”), AGF Investments America Inc. (“AGFA”), Highstreet Asset Management Inc. (“Highstreet”), AGF Investments LLC (formerly FFCM LLC) (“AGFUS”), AGF International Advisors Company Limited (“AGFIA”), AGF Asset Management (Asia) Limited (“AGF AM Asia”), Doherty & Associates Ltd. (“Doherty”) and Cypress Capital Management Ltd. (“CCM”). AGFI, Highstreet, Doherty and Cypress are registered as portfolio managers across various Canadian securities commissions, in addition to other Canadian registrations. AGFA and AGFUS are U.S. registered investment advisers. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission.
Publication date: May 19, 2021