The world of sustainable finance is growing incessantly, yet it still has to contend with a number of myths that seem remarkably hard to shake. The World Resources Institute has identified four of them, explaining point by point why the truth lies elsewhere.

Sustainable finance sacrifices financial returns

Managing one's savings with an eye to the environment and society means resigning oneself to pocketing slimmer returns. It is one of the most common, deep-rooted and persistent myths. And yet, if one looks for objective data to disprove it, there is no shortage of choice. Analysing more than 10,000 mutual funds, Morgan Stanley found that sustainable ones deliver similar or better performance than conventional ones. And they are usually less volatile, too. Oxford University and Arabesque Partners, meanwhile, examined 41 studies. Eighty per cent of them highlight a positive relationship between sustainability and stock market performance.

There is a risk of breaching fiduciary duty

Critics go so far as to claim that sustainable finance breaches fiduciary duty — that is, the legal responsibility that obliges an investor to make the best decisions in the interests of the beneficiary. But acting in the saver's interest does not mean focusing solely on short-term returns while turning a blind eye to everything else. Quite the opposite. Identifying a company's environmental, social and governance policies can be just as important. A responsible company prepares to face climate change, reduces its environmental impact, makes far-sighted choices, avoids waste and disputes with workers — and does not risk incurring penalties down the line.

World Resources Institute ✓ @WorldResources

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Debunking 4 myths about sustainable investing ow.ly/FQbO307h3SG #sustinv #ESG @WRIFinance

♥ 12 19 dic 2016 · Apri su X →

In unstable markets, sustainable investments are dangerous

In recent years, another warning has circulated repeatedly: when markets are turbulent, it is best to rely on traditional, "safe" investments. The supposed proof is the bursting of the cleantech bubble between 2010 and 2011. No one denies it: there were difficulties then and there will be more in the future. One need only think of SunEdison, the American solar energy giant that filed for bankruptcy in April 2016, crushed by more than 16 billion dollars of debt.

Yet these are, on the other hand, stumbles within a market that continues to expand. Over the past decade, installed wind energy capacity has grown, on average, by 23 per cent every year. Solar energy capacity has grown by as much as 50 per cent. In short, for every solar company that goes bankrupt — perhaps because it was managed recklessly — there are a hundred coal companies condemned to a certain end. One can hardly trust those who remain anchored to models, energy sources and technologies that are now dramatically obsolete.

Sustainable finance is a utopia

More and more people are attentive and sensitive to the issue of sustainability — in their diet, their mobility, their purchases and their investments too. But often, when it comes to moving from theory to practice, hesitation sets in.

It is undeniable that managing one's savings ethically involves a small additional burden of work and attention. Nothing, however, that is beyond the reach of any saver. Fund managers, banks and advisers can now draw on an enormous volume of resources provided by authoritative bodies such as the UN PRI. In doing so, they can understand what sustainable finance means and integrate ethical criteria and considerations step by step, without overturning their existing way of operating.

Opening image © Sakura Photography