It’s a common myth that responsible investing means sacrificing performance. In fact, over the long-term, the businesses that are conforming to high standards from an ESG (environmental, social and governance) point of view, and committing to genuine sustainability, are those that are also likely to have the brightest future.
This, of course, is entirely logical, says Petra Lee, Responsible Investment Consultant at St. James’s Place. “Responsible investments have the potential to add to performance because looking after limited raw materials, supply chains, local communities and labour rights are all good business practice,” she says.
Here are three examples from some of the world’s biggest and most highly regarded businesses, which our fund managers invest in on behalf of St. James’s Place’s clients – all of which are being held to high standards by stakeholders (including St. James’s Place and our fund managers) to ensure they are making rapid and measurable progress to avert the climate crisis.
Total amount that our fund managers invest on behalf of our clients: £1.9 billion
The world’s second largest company (by market capitalisation) has truly impressive ambitions when it comes to reducing its carbon footprint and is setting a benchmark for the rest of the world.
Not only does Microsoft plan to have moved to net zero carbon emissions by 20301, it also aims to have removed from the environment every single gramme of carbon the company has emitted since it was founded by Bill Gates back in 19752.
However, such lofty ambition has not impacted performance or investor returns. Since its current CEO, Satya Nadella, took the helm in 2014 and started to put a strong emphasis on ESG principles, the company’s share price has increased eight-fold3.
Says Magellan’s Hamish Douglass, manager of the St. James’s Place International Equity fund: “By aiming to remove all the carbon it’s ever generated, Microsoft is setting a standard in environmental policies over and above where other businesses have gone, and at the same time generating shareholder returns that are almost off the scale.”
Total amount that our fund managers invest on behalf of our clients: £233 million
The global sports brand has been doubling down on its environmental commitments over the past five years or so – and saw its share price grow by 300% between September 2016 and August 20214.
In particular, Nike has been embracing the ‘circular economy’, aiming to recycle as much as possible. Notable highlights have included four billion plastic bottles saved from landfill and reused to make Nike’s high-performing lightweight shoes using its ‘Flyknit’ technology5.
What’s more, as part of its drive towards ‘zero waste’, the company aims to recycle ten times more product waste by 2025 than it did in 2020. Also by 2025, it aims to reduce greenhouse gas emissions in its owned or operated facilities by 70% (when compared to 2020 figures)6.
“Nike has clear and measurable ESG targets focused on community impact, sustainable sourcing, carbon emission reduction, waste, water usage and chemical processes,” says Clyde Rossouw from Ninety One, manager of the St. James’s Place Worldwide Income Fund and Global Equity fund. “It has been a key player in advocating for positive ESG impact over the years and this is presenting in both its commitments and performance.”
Total amount that our fund managers invest on behalf of our clients: £268 million
Following the ‘Dieselgate’ scandal in 2015 – when VW was found to have been falsifying vehicle emissions data – the world’s biggest carmaker (by revenue) has worked hard to become an ESG leader. This move has been strongly encouraged by engagement from investors, including St. James’s Place and its fund managers, who have met regularly with the company’s leaders to move the business onto a sustainable footing.
As a result, VW has invested heavily in electric vehicles (EVs), battery technology and vehicle charging infrastructure and aims to become the world’s largest EV manufacturer by the end of the decade7.
Far from impacting its stock market performance, the company’s share price more than doubled between November 2020 and June 2021 when it became apparent that this was a feasible target that the business would be able to reach8.
“Having been forced to make a step-change in its rate of electric vehicle investment, VW is now well-positioned relative to its competitors,” says Ken Hsia from Ninety One, manager of the St. James’s Place Continental European fund. “Not only is the increased share price an important signal of this, but we are also encouraged by VW earning a higher market share in EVs than in traditional combustion engine cars.”
Our world is changing faster than anyone predicted. We believe responsible investing has a huge role to play in shaping a better world and building a sustainable future.
Past performance is not indicative of future performance.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
1 Microsoft will be carbon negative by 2030, Official Microsoft Blog, January 2020
2 One year later: The path to carbon negative, Official Microsoft Blog, January 2021
3 Yahoo Finance interactive stock chart, Nasdaq real-time price, Feb 1, 2014 (USD36.56) to Sep 14, 2021 (USD296.99)
4 Yahoo Finance interactive stock chart, Nasdaq real-time price, 01 Oct 2016 (USD50.18) to 13 Sept 2021 (USD159.52)
5 Impact Report FY 2020, Nike, March 2021
6 Impact Report FY 2020, Nike, March 2021
7 Volkswagen Group set to use platform model for issues of the future, VW, March 2021
8 Yahoo Finance interactive stock chart, Xetra, 02 Nov 2020 (EUR138.3) to 07 Jun 2021 (EUR313.6)