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Macroeconomics

13 March 2019

Responsible investment moved further into the mainstream in 2018  

Can investments make a good return and do good at the same time?

Increasing evidence suggests this is possible. Millennials in particular are putting their savings into so-called responsible investments at double the rate of investors as a whole. Responding to this demand, asset managers last year launched a record number of 'socially conscious' mutual and exchange-traded funds, according to industry tracker Morningstar. A total of 3,160 funds that follow environmental, social and governance criteria, up by 382 last year, collectively manage $1.2trn in assets, even though inflows fell in what was a turbulent 2018 for stock markets generally.

KBL epb's 2019 Global Investment Outlook cites industry research indicating that the top 20% of ESG companies have consistently outperformed the market. In addition, responsible investing takes into account newly-recognized risks, such as environmental liability and reputational damage, which can severely impact the value of investments. Some investors express concern about "green-washing" to make companies appear more responsible than they really are, as well the absence of clear-cut regulatory or industry standards on ESG criteria. But policy-makers are starting to focus on these issues.