- Responsible investing encourages sustainability in the way companies operate, and sustainable initiatives tend to improve risk management, innovation and operational efficiency.
- Microsoft, Nike and Volkswagen are all delivering shareholder returns while aligning behind strong ESG (environmental, social and governance) principles.
It’s often mis-stated that responsible investing means sacrificing performance. Actually, the reverse is often true – in the long run, the businesses that conform to high standards from an ESG (environmental, social and governance) perspective, and commit to genuine sustainability, are the ones that have the brightest futures.
Petra Lee, Responsible Investment Consultant at St. James’s Place, argues that this is entirely logical.
“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 practices.”
Here are three examples from some of the world’s biggest and most highly regarded businesses – all of which are being held to high standards by stakeholders to ensure they are making rapid and measurable progress to avert the climate crisis.
As the world’s second-largest company (by market capitalisation), Microsoft is setting a benchmark for the rest of the world with its impressive ambitions for reducing its carbon footprint.
They plan, for example, to have moved to net-zero carbon emissions by 20301, and, even more impressively, aim to have removed every single gram of carbon emitted by the company Bill Gates founded it in 1975.2
These lofty ambitions haven’t impacted performance or investor returns – in fact, since the company’s current CEO, Satya Nadella, took the reins in 2014 and began implementing strong ESG principles, share prices have increased eight-fold.3
Magellan’s Hamish Douglass, Manager of the St. James’s Place International Equity fund, says:
“By aiming to remove all of 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.”
Over the last five years, global sports brand Nike has doubled down on its environmental commitments – all while seeing share prices grow by 300% between September 2016 and August 2021.4
The ‘circular economy’ is something Nike have particularly embraced, which means aiming to recycle as much as possible. Most impressively, they rescued four billion plastic bottles from landfill and have reused them to make high-performing lightweight shoes using their ‘Flyknit’ technology.5
And, as part of Nike’s drive towards ‘zero waste’, they also aim to recycle 10 times more product waste by 2025 than they did in 2020. They also aim for a 70% reduction in greenhouse gas emissions in their owned or operated facilities by 2025 (when compared to 2020 figures).6
Clyde Rossouw from Ninety One, Manager of the St. James’s Place Worldwide Income fund and Global Equity fund, says the following;
“Nike has clear and measurable ESG targets focused on community impact, sustainable sourcing, carbon emission reduction, waste, water usage, and chemical processes. 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.”
Escaping from ‘Dieselgate’ in 2015, when VW were found to be falsifying vehicle emissions data, the world’s biggest carmaker (by revenue) has become an ESG leader through considerable hard work. This has been strongly encouraged by engagement from investors, who have worked with the company’s leaders to move the business onto a more sustainable footing.
This has led to a heavy investment into electric vehicles (EVs), battery technology and vehicle charging infrastructure, with the aim of becoming the world’s largest EV manufacturer by 2030.7
Once again, this move has had positive effects on the company’s stock market performance, more than doubling its share price between November 2020 and June 2021, when it became apparent that this target was feasible for the business.8
“Having been forced to make a step-change with 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.”
Past performance is not an indicative of future performance.
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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)