Our thinking

Bad companies, bad returns

4 June, 2021

Bad companies, in the long run, will lose. Just have a look at our story about Shell this week.  

Consumers and civil society have long condemned, protested against and boycotted brands that did more harm than good. Recently, investors and governments have also been increasing pressures on companies, and urging them to do better, whether it be through court rulings, divestments or board-appointees. It is for this reason that we disagreed with an article in the Times earlier this week claiming that the flows going towards ESG funds reflect the desire of the average investor to make a quick profit, rather than, as we believe, reflecting a broader societal shift towards values-driven investing.  

We believe that the reason ESG funds are doing so well right now is because they provide a path to a sustainable future, at a time it feels increasingly important that we reach that destination, and quickly. In the same way that companies have had to consider their wider impact on society and aligning to consumer values better, now so do investment funds. Investors are not just algorithms; they have some of that anthropological intelligence we wrote about this week and consider investments from multiple angles, not just the money making one. And unsurprisingly, the funds that are benefitting from that are the ESG ones as the impact of where we put our money becomes apparent.  

The bottom line here is, there are increasingly sustainable options out there in terms of brands, funds, and all manner of other products. And it is these sustainable options that people are increasingly choosing, across a whole range of different products, including investment funds. Demand pushes up the price, of course, but it’s the desire for social and environmental value that is driving the demand, rather than “hot money” chasing the next quick return, that is responsible for the impressive performance of these funds.  

By Marie Guérinet