Investors are talking about sustainability – and so are we

Growing numbers of investors are pursuing sustainable investment objectives, and they're realising they no longer need to sacrifice returns in the process.

30 Sep 2019

Nick Georgiadis

Nick Georgiadis

Head of DFM Team

Consumers now have a variety of options to shop, eat, and travel sustainably – so why shouldn’t they have readily available access to sustainable investing as well?

Investing sustainably, once considered a niche field where returns are sacrificed for a “greater” social good, has redefined itself and is gaining traction. For over a decade, Cazenove Capital has managed portfolios for private clients and charities spanning a whole range of sustainability requirements – from screening out controversial sectors, to investing in particular themes such as water scarcity; or creating social benefit by investing in social housing.

At Cazenove Capital, investing sustainably does not mean sacrificing financial returns. In fact, our flagship sustainability offering for private clients has delivered strong returns – beating both its benchmark and peer group.

“There is increasing demand from our clients to invest in a sustainable manner,” explains Emilie Shaw, Sustainable Investment Manager at Cazenove Capital. “We believe this trend will only continue to grow as investors become more comfortable with the idea that investing sustainably doesn’t mean sacrificing their returns. We believe truly sustainable companies are those that are well positioned for the seismic, environmental and social change that our world is facing and are better placed to maintain their growth and returns over the long term.”

Increased scrutiny and regulation is likely to benefit these companies. For example, the UK is considering requiring listed companies to disclose climate-related risks, while other governments have already pledged to introduce measures to limit single-use plastic and fossil fuel generation. It is very possible that better disclosure of environmental risks and strategic commitment to reduce environmental impacts will help the performance of sustainable investments and create even greater momentum among these solutions.

Leveraging on the expertise of our parent company, Schroders, we work closely with their award winning Sustainability team to share best practice, develop research and engage with companies on Environment, Social and Governance (ESG) issues. As recognition of our firm’s capabilities, Schroders was ranked first out of the 40 largest European asset managers by the latest ShareAction for its approach to responsible investment.

Track record in sustainability

Our new sustainability models are designed to meet clients’ financial objectives, whilst ensuring their investments are promoting better long-term social outcomes. We achieve this by selecting funds which invest in companies that are focused on creating value for all stakeholders along their supply chains, which should ultimately lead to better long-term growth and shareholder value.

Truly sustainable companies are those that are well positioned for seismic change

The depth and expertise of our internal resource, coupled with Schroders’ track record in sustainability, means we are able to conduct our own critical analysis into what makes a sustainable investment, rather than simply relying on third party ESG ratings and negative screening. This analytical framework has been honed over a number of years and has been integrated into our proven, established fund selection process.

Active weightings toward positive social outcomes

Our sustainable portfolios will avoid funds that invest heavily in so-called “sin sectors” – such as armaments, tobacco and fossil fuels – whilst being actively weighted in favour companies that promote positive environmental and social outcomes. We achieve this by using a two-pronged approach of investing in funds that follow a “best-in-class” approach with high environmental, social and governance thresholds; alongside thematic or impact funds which look to identify companies whose products and services are meeting specific social or environmental needs, such as renewable energy or social housing. 

The universe of investments available for our sustainable portfolios is already large, encompassing equity and bond funds, as well as alternatives and specialist vehicles. This enables us to create well-diversified, multi-asset portfolios. The models will be available across the risk spectrum, with cautious, balanced, growth, aggressive and equity strategies.

Identifying investment specialism

Given the growing demand in this space, fund houses are increasingly launching new sustainability products, which has created additional challenges in quality control. Our track record allows us to differentiate between launches that have been led by creative marketing departments rather than investment specialists, ensuring that any fund in our offering meets strict sustainability and investment criteria.

Our sustainability model portfolios will be an important part of our offering to advisers, allowing them to meet their clients financial as well as social objectives. With demand for sustainable investment solutions growing, we want to ensure that advisers who work with us can access a well-established, deeply considered, and highly sustainable investment solution.

Author

Nick Georgiadis

Nick Georgiadis

Head of DFM Team

Nick joined in 1981 and heads the team which specialises in providing investment advice to clients of Independent Financial Advisers. He is also a Portfolio Director with responsibility for managing a client base largely introduced by advisers. He holds the Securities & Investment Institute Diploma.

 

Contact Cazenove Capital

To discuss your wealth management requirements, or to find out more about our services and how we can help you, please contact: