Thinking About Sustainability, ESG, Ethical or Impact Investing?
Analysing the market and uncovering opportunities, choosing the appropriate investments, monitoring and assessing market dynamics while rebalancing your portfolio. Sounds like a handful? It is. As investors we persistently look for ways to improve the risk/reward characteristic of our investments. Exploring different avenues of adding diversification can often lead to pleasant surprises.
That’s not to suggest jumping into new and unproven strategies without fully understanding and evaluating potential risks and rewards. We believe that every investment analyst should know about the risks and opportunities of environmental, social, and governance (ESG) issues and the implications of ESG factors on strategic asset allocation.
Sustainable or cleantech infrastructure investing is becoming a significant asset class for institutional investors (controlling over $75 trillion in assets) following the historic Paris Climate Agreement which is now in force. Some countries have already implemented a carbon tax that will impact companies with a high carbon footprint. Similar to real estate and private equity, investments in infrastructure require longer investment time horizon due to the lifecycle of projects. However for those investors that have the capacity to include illiquid assets in a diversified portfolio, infrastructure is an excellent consideration due to its low correlation to other assets.