Trends seem to be a constant factor in the world of investing. There are various reasons for this, but perhaps the most salient is that investing simply reflects real life. And, in real life, people follow trends, whether it’s because something is successful, or it’s fashionable. Either way, they’re a part of life, and a part of investing, and getting a grasp of how they can impact investment decisions is crucial.
For example, one recent trend goes by various names: responsible investing, RI, socially-responsible investing, SRI, ESG (environmental, social and governance), etc. Whatever you want to call it, more people are investing in order to change the world in addition to making money. Can you do both? I guess we’ll see how this trend works out, won’t we.
Fact or fiction?
Is responsible investing (the name we’ll stick to for now) a real phenomenon? Yes. According to a report by Cerulli Associates, according to managers of alternative investments, it’s their clients that are asking for their money to be invested in socially-responsible entities, whether it involves clean energy or working with a government that’s responsible to its citizenry. So, this is not just a trend people are talking about. It’s a trend that’s apparently driven by some real investors.
There are a few things to note about this trend. First, it’s occurring in the alternative investing sector. As with most alternative investments, they are driven by investors’ inability to find what they want in the traditional markets. In the past, this has involved a desire for greater returns. But, now, it’s involving an attachment of certain values to investment decisions.
The impact of a trend
Second, the question must be asked: Does responsible investing square with seeking desirable returns, or does investing that doesn’t come with the official label of responsible investing mean it’s socially-irresponsible investing? These are ethical questions, of course, but time will determine the financial viability of responsible investing. As investors, we must take the bottom line into account.
Finally, regardless of what a person thinks about the merits of responsible investing, it’s a trend that’s actually happening out there. As such, it must be taken seriously and assessed for its real impact on the portfolios of shrewd and discerning investors.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.