Can responsible investing be profitable?
COP26, the climate summit, is underway in Glasgow and sustainable finance or socially responsible investment will logically be one of the central topics of debate. Daniel Sancho, investment manager at MAPFRE Gestión Patrimonial, explains, during an appearance on the Ponte en Acción program on Negocios TV, that ESG investing “isn’t anything new, at least at MAPFRE, and it turns out that these kinds of investments yield healthy returns, more so than a traditional investment approach.” And the data is there to support this claim. For example, MAPFRE AM, fund manager of the insurance group with more than 40 billion euros in assets under management, has two flagship funds, MAPFRE AM Capital Responsable and MAPFRE AM Inclusión Resonsable, classified within the category of Article 8 of the new Sustainable Finance Disclosure Regulation (SFDR). The results produced by these two funds are very positive, to the point that these products are beating their own benchmark indices. The first, which is a mixed fund, is showing an accumulated return of 5.15 percent so far this year compared to 3.97 percent for its benchmark index (Stoxx 50, the ICE BofAML Euro Broad Market Index and the ICE BofAML Euro Treasury Bill Index), while the Inclusión Responsable variable income fund is up an impressive 22.63 percent in the same period, against the 21.34 percent gains for the EuroStoxx 50 index.
The reality is that sustainable companies, which make up these portfolios, are more resilient, more competitive, generate more opportunities, better tackle new challenges and enjoy a better reputation. “It’s common sense that a company with good governance for example, ends up being more sustainable. We believe there are many opportunities in ESG investments. On some occasions, you may pay a little over the odds, but sometimes, paying more is better,” adds Sancho, who warns that, nevertheless, and as has been seen recently with the energy crisis, “we have to aim for a sustainable world but we can’t do it overnight.”
When considering how to implement such a strategy, excluding polluting companies that don’t meet any ESG criteria is one of the simplest methods, but this can be a mistake. MAPFRE for its part, is committed to integration. As Sancho concludes, “there are numerous energy companies doing a good job and exceptions can be made with this type of investment”, as long as there is a defined and concrete plan in place for a medium and long terms transition.