In two recent Forbes articles, Georg Kell, former head of the Global Compact, discusses the rise and future challenges of ESG investing. In the first article, he looks at the forces that have shaped ESG investing over the past 15 years. Since the acronym was first introduced in 2005 (in the landmark “Who Cares Wins” report authored by onValues), ESG investing has rapidly grown and today is estimated at over $20 trillion in AUM or around a quarter of all professionally managed assets globally.
In a further article, Kell asks if the case for corporate responsibility and ESG investing still holds in the face of rising populism and protectionism and a changing environment, where the assumptions of a fair level playing field based on rules and trust in public institutions may no longer hold. He argues that the forces that propel corporate sustainability forward are largely independent of policymaking and driven more by technology, transparency and resource scarcity which lead to financial drivers. “But only up to a point. Should the destruction of the international rule-based system become the new dominant way of policymaking, then all bets are off”, he adds. Kell concludes with an appeal to responsible business leaders to speak up and to use their influence to defend and strengthen the rule-based market system and the values that hold markets and humanity together.
It’s Spring and we feel more than ever motivated to contribute to initiatives aimed at aligning private wealth and financial markets to our society’s sustainable development goals! On top of what we can contribute through our consulting work, we therefore engage in collaborative initiatives and fora aimed at innovating, growing and mainstreaming sustainable approaches. New engagements include the active role of Ivo Knoepfel in the Advisory Board of the Center for Sustainable Finance and Private Wealth at the University of Zürich and his role as speaker and moderator at this year’s pymwymic Impact Days, a gathering of leading European wealthholders engaged in investing for positive impact. Ivo Knoepfel has also recently become a trustee of the PeaceNexus Foundation , whose aim it is to strengthen organisations committed to preventing conflict and building peace, and continues to act as an advisor to WWF Switzerland in relation to their benchmarking of Swiss pension funds’ responsible investment commitments.
Investing in sectors and companies with a high impact on the global climate is “dangerous for your portfolio’s health”, if we express it in similar terms as health warnings on cigarette packs. It is not only governments’ policies aimed at maintaining global warming within the 2°C mark, but also the rise of the shared economy, on-demand transportation and the new price competitiveness of renewable energies that will lead to tectonic shifts in the power, automobile, oil and other sectors. onValues helps clients align their wealth to the challenges ahead by focusing on investments that are part of the solution and not part of the climate change problem. We believe that it is not enough to avoid high-risk companies and to lower the portfolio’s carbon footprint (current emissions of portfolio companies). The main focus should be on investing in winning companies providing break-through products and services needed for a low-carbon future. Long-term investors will be able to generate superior financial returns and contribute to a better world.
On behalf of our clients, onValues has recently assessed the role of gold as part of a long-term investment strategy. Results of our analysis using price data for the last 20 years indicate that gold (measured in US-Dollars) did not outperform other ‘safe haven’ assets such as high quality government bonds in periods of pronounced stock market volatility. For non-US investors a volatile and generally weakening US-Dollar introduced exchange rate risks, frequently wiping out the occasional gains of gold holdings. We therefore cannot validate the common belief that gold is a good portfolio insurance based on recent history – especially for European investors. Moreover, the environmental and social impact of the gold industry needs to be taken into account. In extreme crisis situations, such as a global war or the collapse of global financial systems, gold could play a role as a store of value. For clients attaching a high likelihood to such events it could make sense to hold significant amounts of gold, but this would require a well thought through implementation plan, factoring in choices like physical denomination (coins, bars, jewellery), storage location (bank, external storage, at home) and security aspects when accessing and using the gold during crisis times.