Socially responsible investment prognosis set positive for 2014March 2014
The year 2014 is “unlikely to see the spectacular equity returns” enjoyed during 2013, but it will be a year in which assets in a logical manner can be managed, according to Amy Domini, founder and ceo of Domini Social Investments (www.domini.com), a New York City based mutual fund family.
“What lies ahead for responsible investors during 2014?” asked Domini in an investor communiqué this February. “Certainly new products, particularly those that are cleaner or more local, certainly a more predictable stock market, and probably enhanced interest in the value added by utilizing social and environmental considerations when choosing investments,” she added.
The executive, who manages around $1 bn in liquid assets for high net worth families at the Sustainability Group in Boston, asserted that these trends already evident. It would seem good news for the ethical investor.
The desire for more direct and useful products has, in recent years, led institutional and ultra-wealthy investors to buy venture capital funds that promise to seek out and invest in segments of the sustainability market such as clean land or hydro-culture, solar power or ‘bottom-of-the-pyramid’ wealth creation. Nevertheless she noted: “These investment vehicles demand long-term commitments with no liquidity. That isn’t for everyone.”
In response Domini Social Investments launched Nia Global Solutions, an equity portfolio that seeks to bring some of these concepts into the public market. Meeting the strictest of sustainability questions, Domini started with their own a basic universe of 2,800 companies. Only three worked for Nia. Today the firm now has a pool of about 43 [companies] to work with in managing the portfolio.
Noting that there is likely to be a “big new effort” in the socially responsible investing world” she stated: “Bringing the concepts of high impact investing into the public equity setting is filled with challenges, but the industry has long heard the call from investors for something cleaner and more consistent with personal values than what they’ve seen to date.” Domini asserts too that 2014 will see a growing “acknowledgement that Environmental, Social and Governance (ESG) research adds value.”
The Domini Social Equity Fund (Investor shares) returned 32.85% in 2013, outperforming the S&P 500 Index, which returned 32.39%. So, something is working. Meanwhile, the Domini International Social Equity Fund (Investor shares) outperformed its benchmark by more than 2%, returning 25.77% versus the MSCI EAFE Index’s 23.29%.
The market will also start to see “the development of real products for the public’s new interest in the ideas of ‘Slow Money’, Sustainable Agriculture, Fossil-Fuel Free investing and High Impact.” On fossil-fuel free investing, she added: “It’s real and it’s going to become an industry standard. The challenges of investing without fossil fuels have been well stated, but they lack moral validity.”
Separately, AIM-quoted Impax Asset Management (www.impaxam.com), which is focussed on investing in alternative energy, water, agriculture and related markets and manages £2.4bn for investors globally, late this January reported strong investment performance in 2013 for all its listed equity strategies, relative to global markets, relevant benchmarks and peers. Impax’s flagship investment trust, Impax Environmental Markets plc saw a robust +33.2% performance in the past calendar year.
Ian Simm, Impax’s Chief Executive, commenting said: “It’s been a long time since the outlook for environmental markets and resource efficiency stocks has been quite as good as it is right now. The next 12 months look promising across all our investment strategies, buoyed by a broad-based cyclical recovery from the deepest downturn in living memory.”
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