Harnessing the power of sustainable investing in your portfolio
In the penultimate of the Thematic Investing video series from the Portfolio Construction and Strategy (PCS) Team, Matthew Bullock, EMEA Head of Portfolio Construction and Strategy, discusses what a sustainable allocation can do for a portfolio.
3 minute watch
Key takeaways:
- Enduring global environmental and social trends, including climate change and demographic shifts, are driving investors to consider companies that have a positive impact and which are likely to be the ‘winners’ of tomorrow.
- Portfolio analysis suggests that adding sustainable investments to traditional portfolios does not significantly affect risk but can improve returns. However, investors should be mindful of the large cap bias that ESG indices may present.
- Our expert PCS Team can offer customised support for incorporating sustainable investments into portfolios, by utilising Janus Henderson’s proprietary EDGE technology to ensure investors make informed decisions that align with their financial goals and the evolving sustainable investing landscape.
Sustainable Investing is one of four areas that we at Janus Henderson have identified as an investment space with sizeable growth opportunities in the future.
There is no doubting the significant tailwind behind sustainable investing and the environment and social megatrends that are shaping the global economy today and in the future.
We are witnessing a generational change where we’re experiencing climate change an ageing population resource constraints and a booming population.
So, investors around the world are quite rightly changing their portfolios to support companies that are trying to make a positive change, but also to participate in the likely upside by identifying the winners of tomorrow.
However, it is imperative, that investors consider the impact of any portfolio changes in advance, such as increasing exposure to sustainable investments.
So, let’s take a look at what happens if we add sustainable investments to a traditional equity portfolio.
Utilising our proprietary Janus Henderson EDGE technology, we take a standard equity exposure in this case, we’re just using the MSCI All Country World Index and see what happens when we add an exposure to a broad sustainable index, in this case the MSCI World ESG Leaders Index.
As we can see here, adding the ESG allocation into the portfolio has very little impact upon risk, in fact, it’s almost identical historically we’d also have seen the returns increase!
The same can be said for the drawdowns which also change very little.
However, we can see that the ESG index is more agnostic between large cap value and large cap growth, so we want to factor that into our thinking when we’re determining the right asset allocation blend.
Now we know that Sustainable investing is a very broad area and a simple ESG index won’t represent what a lot of investors are doing.
This is where we at Janus Henderson, look to partner with you, using our Janus Henderson Edge technology, to help review your portfolio and to consider the impact of potential changes before they are made.
The Janus Henderson Portfolio Construction & Strategy team are of course on hand to assist you, please contact us to arrange a portfolio consultation and to hear more about the trends that we see in the future.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
Marketing Communication.
3 minute watch
Key takeaways:
- Enduring global environmental and social trends, including climate change and demographic shifts, are driving investors to consider companies that have a positive impact and which are likely to be the ‘winners’ of tomorrow.
- Portfolio analysis suggests that adding sustainable investments to traditional portfolios does not significantly affect risk but can improve returns. However, investors should be mindful of the large cap bias that ESG indices may present.
- Our expert PCS Team can offer customised support for incorporating sustainable investments into portfolios, by utilising Janus Henderson’s proprietary EDGE technology to ensure investors make informed decisions that align with their financial goals and the evolving sustainable investing landscape.