Pierin Menzli, head sustainable investment research at Bank J. Safra Sarasin, tells Citywire Selector what the major concerns fund selectors face when trying to increase their green credentials.
In 2017 sustainable investors will have to address three important challenges. Firstly, innovative technologies such as industrial robots and social networks are radically transforming the workplace, leisure time and social interaction. This results in huge challenges and opportunities for companies, employees and investors.
Currently there are very limited investment solutions in the market place that focus on these disruptive technology solutions and consider relevant environmental, social and governance challenges in the investment decision making process.
Secondly, impact investing is becoming more important. Partly following the launch of the United Nations’ Sustainable Development Goals (SDG). Investors are looking for new investment solutions with greater impact. In recent years micro-finance funds, and more lately green bond funds, have gained investors’ attention, and currently make up the largest segments within this niche investment category.
However, investors are also looking for new investment solutions in traditional asset classes (e.g. listed equities) which create an intended and positive impact for society or the environment. More product innovations will hit the market soon.
Thirdly, climate risk discussions will transition from the political stage into investors’ meeting rooms. Thanks to increased investor awareness, continuous media presence and availability of passive and active solutions this topic will only gain in importance.
Passive solutions offer carbon risk reductions, similar risk-return characteristics compared with traditional investment approaches and still retain simplicity. Investors with an active investment approach can get a very diverse set of climate investing solutions via listed or private equity funds.