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“How do I invest with Environmental, Social, and Governance (ESG) principles and does investing responsibly support long term returns?”

What You Can Do
Environmental issues are changing the world around us faster than anyone could have predicted, but there are many small things we can all do when it comes to responsible investing to make a difference. These include swapping to green electricity, reducing travel, and consideration of where your savings and retirement funds are invested. The latter is one of the most impactful and research has proven that making the right investment can be 27 times more effective at cutting your carbon footprint than the combination of eating less meat, using trains instead of cars, taking shorter showers and flying less. 

We believe that investing has a huge role to play in building a sustainable future. A responsible investing strategy seeks to support companies that align with ESG principles and engage with others to improve their behaviour when it comes to protecting our planet.

Environmental, Social and Governance
Environmental criteria shows how companies interact key issues such as carbon emissions, recycling and plastic use. Social criteria looks at how they manage relationships with employees, suppliers, customers and communities–for example, when there are issues such as worker rights and inclusion.

Corporate governance concerns leadership issues, such as executive pay, internal controls and shareholder rights. Generally, a company could be considered a responsible business by, for example, having credible net-zero carbon-emissions plans, looking after its employees and supply chains, and having sound management practices.

As part of being a partner practice within St. James’s Place, at Select Investors we are committed to integrating responsible investment considerations into investment decision making. We measure and monitor the companies in which our fund managers invest, drawing on ESG criteria to ensure we are using money as a force for good.

As a member of the Net Zero Asset Owner Alliance, St. James’s Place has committed to all investment portfolios becoming net zero by 2050, if not sooner, and to being a proudly leading responsible business.

How responsible investing supports long-term returns
There is now plenty of evidence that shows how a business approaches these issues and plays a significant role in long-term performance. First and foremost, this belief is shared by most fund managers. A survey of 104 fund managers by the investment consultancy firm Redington revealed that 73% of managers believed ESG integration adds positively to financial performance. Likewise, data from MSCI found that, in the seven years leading up to 2020, the top third of companies ranked by ESG ratings outperformed the bottom third by 2.56% per year. 

To put this into context, if you were to invest $1 million for 10 years and generate 5% p.a. return by investing normally, or a return of 7.56% by investing in ESG funds, your portfolio would be $443,669 more at the end of the 10-year timeframe. The pandemic is also accelerating trends that were already well underway, such as the move towards green energy and electric vehicles. Developments such as these are part of the reason why studies also suggest that improved performance from ESG practices is more evident in the long run. 

Embedding ESG into the investment process is not a ‘quick win’. Instead, it requires extensive engagement between investors and company management.  

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Past performance is not indicative of future performance.

JAMIE BURGMANN, Private Wealth Manager at Select Investors

If you would like to learn more on responsible investing, please email Jamie on Jamie.Burgmann@sjpp.asia.

Select Investors is a Partner Practice of St. James’s Place (Singapore) Private Limited.

Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group, and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.