Sustainability investing (SI) is rising in popularity, with more than USD 23 trillion in assets now managed globally under SI principles. In this chapter, we look at the definition of sustainable (or responsible) investing, its present state, and how we got there.
Environmental, social and governance (ESG) factors
Sustainability investing is a global phenomenon that seeks to provide a framework for including environmental, social and governance (ESG) factors into everyday investment decisions. What began as a crusade against slavery has evolved into a multi-trillion dollar industry. The United Nations defined it this way when it launched its Principles for Responsible Investment (UNPRI) in 2005:
Principles for Responsible Investment (UNPRI)
“Responsible investment is an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns.”1
Many investors now take sustainability investing one stage further and use it to try to enhance returns – thereby enjoying a superior investment performance while contributing to a better world at the same time.
SI is now a massive concept accounting for a quarter of all assets managed around the world at the end of 2016, the last date for which figures were collated. In Australia and New Zealand, 50.6% of assets are now managed sustainably. SI use is biggest in Europe, where 52.6% of assets are managed under SI principles, amounting to investments worth more than USD 12 trillion. That’s equivalent to half the annual GDP of the United States or European Union, according to the Global Sustainable Investment Alliance.2
Indeed, it has come a long way since its humble origins in the 18th century church, when Quakers refused to invest in anything involved with the slave trade, creating the first exclusions. In more recent times, the concept of improving human equality to create a better world began with the first equal rights legislation in the 1960s. One of the first major uses of exclusions was seen in the 1970s when companies refused to invest in South Africa due to its apartheid regime.
SI reached the global stage in 1987 when the United Nations World Commission on Environment and Development – known as the Brundtland Commission – released a report entitled ‘Our Common Future’. It is most notable for coining the term ‘sustainable development’, which it defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”3
People, Planet, Profit
Tying this into general business activities later led to a concept of the ‘three Ps’ – People, Planet, Profit – gaining traction in the 1990s. This argued that a business-minded focus on each of these three words (and not just profit) were equally important for any commercial enterprise to be sustainable.4
This was adapted to become a focus on environmental, social and governance factors, or ESG, a different three letters which now forms the bedrock of most sustainability investing processes.
With the focus now on ESG, sustainability investing is no longer limited to exclusions, saving the environment, or putting people’s welfare alongside profit. Analysis of ESG factors is now routinely integrated into wider financial analysis that still looks at standard metrics such as profitability and market share. It’s become part of the mix – it’s no longer a rebel with a cause.
This has created the concept of integrated sustainability (discussed in Chapter 3) and a more holistic, all-encompassing approach by which SI has reached maturity, essentially becoming mainstream.
1. UNPRI https://www.unpri.org/pri/what-is-responsible-investment
2. Global Sustainable Investment Alliance 2016 Review http://www.gsi-alliance.org/wp-content/uploads/2017/03/GSIR_Review2016.F.pdf
3. ‘Our Common Future’, the Brundtland Commission http://www.un-documents.net/our-common-future.pdf
4. John Elkington, ‘Enter the triple bottom line’, 2004 http://www.johnelkington.com/archive/TBL-elkington-chapter.pdf
There are various ways to approach sustainability investing. In this chapter, we will look at the three most relevant strategies – using exclusions, integration and impact investing – and discuss what approach suits various types of investors best.
SI is not one catch-all concept – there is a broad range of different styles and preferences in doing it, with no ‘right or wrong’ way of going about it. However, consensus has grown over which motivational approach fits various types of investors best, as this will depend on their investment goals.
Their motivation may be in following personal beliefs in not wanting to invest in contentious things; they may want to use SI as a means of improving their risk/return profile; or they may like the idea of contributing towards positive change. This has narrowed it down to three main approaches: using exclusions; integrating environmental, social and governance (ESG) factors into the investment process; or embracing impact investing.
Exclusions: The classic way of engaging in SI, and still the most popular, is by refusing to invest in a company that has controversial business practices. This ranges from business activities deemed to be harmful to health or the environment, such as tobacco or Arctic oil drilling, to outright criminal behavior such as corruption or forced labor. Some companies must be compulsorily excluded under national laws; for example, Dutch legislation prohibits investment in manufacturers of cluster bombs.
The prospect of reputational damage – or put more simply, the fear of looking bad – has often been a reason for not wanting to invest in something that wider society disapproves of. Many exclusion-based strategies avoid investing in firms involved in the so-called ‘sextet of sin’ – tobacco, weapons, alcohol, nuclear power, gambling and pornography. But what is deemed controversial evolves over time. In recent years, it has become more common to exclude thermal coal miners, while some now view sugar as ‘the new tobacco’.
Integration: This is the systematic use of financially material ESG criteria to improve the risk/return profile of investments, and therefore boost performance. Over time, a better risk/return ratio should in theory lead to investment returns that are superior to those of the benchmark, thereby generating alpha.
How this is achieved in practice differs widely between asset managers. Sometimes ESG integration is carried out by specialist SI teams, and sometimes more generally as an overlay across an asset class. Their sources of analysis will also differ; some firms prefer to conduct their own sustainability research, while others rely on external analysis provided by specialist ESG research firms. This is discussed more fully in Chapter 3.
Impact investing: This involves making investments with the aim of creating a measurable beneficial impact on the environment or society, as well as earning a positive financial return. This could mean investing in a fund that aims to bring clean energy to emerging markets or improving nutritional standards in food. A common form of doing this is by following the United Nations Sustainable Development Goals, discussed further in Chapter 4.
Impact investing has three key components. First, there must be intentionality: an investor is making a deliberate, targeted effort to exert a positive impact. Second, it should generate a positive return on investment; this is not charity. And third, the financial, social and environmental benefits of impact investment should be measurable and transparent.
So, which one is best for whom?
Exclusions are most suitable for investors with a clear vision on which products or behaviors are incompatible with what they or their stakeholders deem to be important. Some professional investors have ‘red lines’; for example, health insurers tend to exclude companies making products that are detrimental to general health, such as cigarettes.
Integration is a good option for investors who want to ‘mainstream’ ESG and not use it in isolation, but as part of a wider, more holistic approach. Such investors believe that using ESG information leads to better-informed investment decisions and a better risk/return profile, though it is not the ‘be-all and end-all’ – standard metrics still apply.
Impact investing is best done by investors who want to make a positive impact on society while believing that they can generate sufficient investment returns while doing so. Specifically targeting investing in renewable energy, for example, helps the fight against global warming while also making a financial return from the sale of the electricity generated.
Most investors will choose a mixture of these three styles. Some will use exclusions as part of integration and view it as negative exclusions mixed with positive inclusions. Others prefer to stick with their own exclusions on moral grounds, and take a less stringent approach to applying sustainability to other investments while they find their feet.
Full integration is, however, growing in prominence, as it can act as more of a ‘catch-all’ method that in some asset managers can supply as standard. Impact investing is more specialized, and the funds targeting it are more limited. Subsequently, some investors use this method as a ‘bolt-on’, particularly if they have a particular interest in, for example, emerging markets.
Environmental, social and governance factors are now routinely integrated into the mainstream investment process. In this chapter, we will discuss how this is done, and the forms that it can take.
As we saw in Chapter 2, ESG integration is one of the three main ways of adopting SI. The United Nations Principles for Responsible Investment defines this process as:
“The explicit and systematic inclusion of environmental, social and governance issues in investment analysis and investment decisions. Put another way, ESG integration is the analysis of all material factors in investment analysis and investment decisions, including environmental, social, and governance factors.”5
What is key here is ‘financial materiality’ – the factors being considered are not just ‘nice to have’, but have a direct impact on the company’s bottom line. For example, an investor will not just look at factors such as pollution or excessive waste from the perspective of harming the environment. Such behavior may also have a financial impact on the company, from attracting fines, to raising costs and regulatory risks due to poor resource conservation.
ESG integration is usually done in three steps. The first is to identify and focus on the most material issues affecting the company. Then the investor can analyze the likely impact of these material factors on the company’s business model. Finally, this information can be incorporated into the valuation analysis to form a fundamental view.
This ESG analysis forms part of a wider mix of traditional metrics to value the company and its prospects, and then decide whether to buy its stocks or bonds. Other factors remain important, such as the fundamentals of the business; whether its market is growing; and how profit margins can withstand future shocks, advances in technology or changing tastes. Ultimately, anything a business does needs to be sustainable, or it will face decline. Witness Kodak, which did not transform from film to digital, and filed for bankruptcy in 2012 before reemerging the following year with a different business model.
A big advantage of ESG integration is that it works across all asset classes – it has been proven to work just as well in fixed income markets as in equities, and can also be applied to commodity or real estate portfolios.
In general, ESG analysis in equities seeks to identify an upside that is not necessarily reflected in the share price, while analysis in bonds seek to expose any downside that may not show up in its credit rating. ESG is being integrated into an existing framework that incorporates other factors, and is not used in isolation.
One way of using ESG analysis to create highly sustainable portfolios is through positive screening, where what you include is more important than what you exclude. This style specifically seeks to find securities with higher ESG scores than others, so that a better-informed decision can be made about whether to buy it.
Sustainability scores may also be a trigger to go overweight or underweight on the security – buying relatively more or less bonds than their presence in the relevant benchmark would imply – rather than including it wholly or excluding it completely. For countries, such ESG scores would be used for investment decisions on their government bonds.
For investors who only want to take this one step further and only include the most sustainable companies in their portfolio, the ‘best-in-class’ approach can be followed. This solely targets the companies with the highest ESG scores in a particular sector, and largely ignores all the others.
The best-in-class approach is becoming a more popular means of creating sustainability-themed portfolios, but it does have the drawback that the investor is narrowing the investment universe to rely solely on ESG criteria as the only driver of future returns. And it means excluding stragglers who may have more long-term potential to improve than those already at the forefront – so it is highly focused and cannot be considered mainstream.
Sustainability investing is no longer a niche topic, but is wholly connected to some of the biggest issues of our times. In this chapter, we explain how four major tailwinds are boosting its adoption.
Firstly, a number of megatrends are setting the agenda across global environmental, social and governance (ESG) issues, with climate change at the forefront. Secondly, increasing regulation is forcing SI uptake in areas where it was previously voluntary, such as in raising food standards.
Thirdly, the advent of the UN’s Sustainable Development Goals has essentially monetized what was previously humanitarian work. Finally, a wealth transition in society is putting more money in the pockets of more socially conscious people such as millennials, who are increasingly vocal about using SI in their savings plans.
Trends essentially follow patterns of human behavior that change over time. Some are technological, such as the advent of the internet; some are societal, such as increasing health awareness; and some are natural, such as solutions to global warming.
World Economic Forum
In its Global Risk Report 2018, the World Economic Forum identified a number of megatrends that are changing the face of investing. Three of the leading ones that are producing both risks and opportunities for investors are climate change (E), inequality (S) and digitalization (G).
Perhaps the biggest of all is trying to meet the Paris Agreement challenge of containing global warming to 2 degrees Celsius above pre-industrial levels. As the emission of greenhouse gases led by carbon dioxide is seen as the main culprit, principally through the burning of fossil fuels, this requires decarbonization on a global scale. Effectively, the world needs to become carbon-neutral by 2050 to meet the 2 degrees target by 2100.
The second is the need to address rising inequality within nations, which is itself being driven by a number of factors including globalization, immigration and robotization. This has partly fueled a rise in populism among people who feel marginalized and financially penalized by ‘progress’. Some countries have faced outright social unrest, which raises risk premiums that can be seen in higher yields on government bonds.
The third mega-trend is digitalization, and its principal drawback – the issue of cybersecurity. A 2017 study by Credit Suisse showed that the annual cost of cybercrime has reached about USD 500 billion, extracting roughly 15-20% of the internet’s annual economic value. This has, though, presented a significant investment opportunity in the companies combatting it, such as security software firms and fintech solutions for bank cards.6
Much of the landscape is changing due to regulation. Perhaps the most famous is the Paris Agreement that was ratified by 174 countries on 22 April 2016 – now designated by the UN as ‘Earth Day’. In financial markets, regulation ranging from Basel III to Solvency II has put in place measures to prevent another global financial crisis, which has changed the ways in which banks and insurers operate.
Other initiatives on the way include plans by many governments to force companies to reduce sugar levels in foods to combat obesity, possibly with sugar taxes now being trialed in various countries. Then there are laws that require greater checks in supply chains to root out any child or slave labor, dangerous working conditions or other socially unacceptable practices. And some exclusions are legally enforceable, such as banning investments in controversial weapons such as cluster bombs.
Sustainable Development Goals
Another global initiative to try to create a better world while also earning a return on investment is the UN’s 17 Sustainable Development Goals. These tackle issues ranging from eradicating hunger to improving education for girls, as seen in the chart below:
Investors can target funds that in some way or other contribute to one or more of the goals. For example, a fund may seek to buy food producers that are investing in healthier and cheaper products (SDG2), or health care companies that are developing vaccines for use in emerging markets (meeting SDG3), among others.
Meanwhile, a major wealth transition is taking place in which more capital is gradually being controlled by millennials – the generation born since the mid-1980s. Research shows that this cohort have much more interest in investing sustainably than their parents or grandparents – and they will have a lot of money to play with. Millennials will inherit up to USD 59 trillion between now and 2060, creating the largest intergenerational wealth transfer in history, according to the Center on Wealth and Philanthropy at Boston College.7
Morgan Stanley’s 2017 ‘Sustainable Signals’ report found that millennials are twice as likely as other investors to want to contribute to a better world as well as make a financial return. “A younger generation of investors, who overwhelmingly believe that their investment decisions can make an impact, is leading the sustainable investing charge,” it said.8
Meanwhile, Campden Wealth, a UK research group, and Swiss investment bank UBS, surveyed 262 family offices with average assets of almost USD 1 billion. It showed that 40% of those questioned expected to increase their allocations to sustainability issues such as resource efficiency, conservation or wellness in the next decade or so.9
They also expect their wealth manager to use ESG, according to a study by Factset, shown in the illustration below:10
7. Boston College, Center on Wealth and Philanthropy: www.bc.edu/research/cwp.html
8. Morgan Stanley, ‘Sustainable Signals’, 2017 http://www.morganstanley.com/ideas/sustainable-socially-responsible-investing-millennials-drive-growth.html
9. UBS, Global Family Office Report, 2017 http://www.globalfamilyofficereport.com/purpose/
10. Factset, the Culture Challenge for HNWIs for the wealth management industry in the information age: https://msenterprise.global.ssl.fastly.net/wordpress/2017/07/Facset-The-Culture-Challenge_final-in-Wealth-Mgmt.pdf
Knowing what constitutes sustainability investing is only half the battle – it is just as important to know what it isn’t. In this chapter, we discuss some of the more common myths about SI, with a video bringing them to life.
Myths about SI
While interest in SI is growing every day, some misconceptions about it have lingered since it came into public consciousness decades ago.
Perhaps the biggest myth is the idea that using ESG factors in investment processes hurts performance. In fact, there is now plenty of evidence showing that using SI can enhance returns. As this misconception is the most important one to debunk, it is discussed more fully in Chapter 6.
Another pervasive myth is that sustainability is only about green issues. While the environment remains important, ESG mean focusing on social and governance factors as well. Indeed, the S and the G can be much more important for some companies than the E.
Meanwhile, a very 21st century misconception is that only millennials are interested in sustainability. While, it is true that younger people are more likely to believe in it more than their parents or grandparents, as seen in Chapter 4, research shows that all age groups support the concept of it.
Debunking these kinds of issues requires hard facts, which has generated a myth in itself: that there is not enough data out there to prove that it works. In fact, the real problem here has been that there is too much data, creating an analysis industry of its own to enable investors to make sense of it all.
These are some of the most common myths – there are more, ranging from 'SI only works with equities' to 'SI does not work in emerging markets'. Check out our video below for 'The truth about sustainability investing: facts & fiction'.
Most people agree that investing sustainably is a good idea – but does this come at a price? In this chapter, we explain how using SI leads to better risk-adjusted returns in the long run, with some academic research to back it up.
The notion that using SI costs performance comes from the belief that it implies giving up returns in pursuit of some sort of ideal. Part of the reason for this is that in some cases, adopting sustainability does incur costs.
For example, energy companies that are changing business models to move away from fossil fuels need to spend billions on new infrastructure. Checking that supply chains do not use slave or child labor can be expensive, and making an effort to hire more women, or people from ethnic minorities can similarly be time-consuming and costly.
So is it worth it? In the long run, yes. The world is inexorably changing, fueled by regulation, consumer habits and demographics. Companies that are making these kinds of investments to keep up with events today will reap the rewards in the future. This kind of commitment eventually feeds through into their profits, and ultimately into the values of equities and bonds.
And every case is different: ESG risks will vary depending on the company, sector or industry. For example, environmental factors are a bigger problem for miners than for software producers, while social factors can be game-changing for sectors with lots of low-paid workers such as retailers, and governance is a particularly big deal for banks. We discuss some examples of how SI affects different sectors in Chapter 9.
For investors, those that are making the time and effort to analyze just how sustainable future enterprises can become will be able to make better-informed decisions about which stocks and bonds to target. This lowers risk exposures while also enjoying enhanced returns, improving the risk/return ratio from both sides of the equation.
The main reason for this is that at the core of ESG integrations is only analyzing issues that are financially material – they have a direct financial outcome on the bottom line. This means treating pollution, for example, as a potential future clean-up or regulatory cost for the polluter, rather than as a societal issue of air quality. Companies with poor social or governance factors will eventually underperform those with the right talent and management. It is financial, not emotional.
Still not convinced? Three studies looking at this ‘added value’ issue in the past three years are particularly noteworthy.
Using sustainability investing principles therefore can therefore be shown in many examples to raise and not reduce returns, or at least it does not detract from performance as some have suggested.
11. Clark, Gordon L. and Feiner, Andreas and Viehs, Michael, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (March 5, 2015). Available at SSRN: https://ssrn.com/abstract=2508281 or http://dx.doi.org/10.2139/ssrn.2508281
12. Khan, Mozaffar and Serafeim, George and Yoon, Aaron S., Corporate Sustainability: First Evidence on Materiality (November 9, 2016). The Accounting Review, Vol. 91, No. 6, pp. 1697-1724. Available at SSRN: https://ssrn.com/abstract=2575912 or http://dx.doi.org/10.2139/ssrn.2575912
Active ownership is an important part of sustainability investing. In this chapter, we explain what it is, and how it is increasingly changing corporate behavior.
An investor is usually seen as someone who owns a company’s securities with the intention of a making a return and/or receiving dividends. But there is another purpose to it. A shareholder also partly owns that company, whereas bondholders provide necessary capital, and they should therefore use their position to demand change when it is warranted.
Investors are increasingly using their power as owners to influence how the firm is run in order to protect or enhance investments. This kind of active ownership is now at the forefront of sustainability investing, and can be particularly effective when shareholders join forces to effect change on the bigger issues.
There are two main ways of doing this: through voting and engagement.
Investors who are unhappy with a company’s policies can vote against them at shareholder meetings. They can also file proposals to demand change, or block resolutions that they do not like. While individual shareholders with only a small percentage of the stock may not be able to make a difference unilaterally, many investors now bank together to object to things collectively. This has been seen in the growth of investor associations taking a common stand on bigger issues.
A good example of where a joint resolution achieved positive change was seen at McDonald’s, which in 2017 agreed to phase out the non-therapeutic use of antibiotics in its chicken meat, and then extend this to pork and beef. This follows concerns that over-use of medically unnecessary antibiotics in farm animals was enabling bacteria to develop a resistance that was causing deaths in humans.
Something that has become a big issue for voting against is levels of executive pay, particularly when the rises in remuneration for board members do not align with the profitability or success of the company. Even if voting against it does not immediately curtail the pay levels, it has proven very effective in creating enough reputational damage or embarrassment for the individuals concerned to prevent it happening in the future.
Voting can be done directly, but is usually done by ‘proxy’ – employing a specialist firm to vote on your behalf. In deciding what standards to follow, many investors follow the principles of the International Corporate Governance Network for assessing best practice. They also in many cases follow local market standards and Stewardship Codes, such as those now operating in Japan.13
Engagement is the process of entering into a formal dialog with companies that have a problem with some aspect of sustainability that is deemed likely to affect their future performance and asset values.
Such issues cross the environmental, social and governance spectrum, and in serious cases can include all three factors, such as using shareholder power to stop cocoa producers over-farming land (E) while using child labor (S) and being subject to inappropriate management control (G). Increasingly, engagement involves combatting slowness in keeping up with international trends such as reducing global warming or improving cybersecurity.
However, it is important to distinguish between engaging on a corporate behavior or product. Behavior can often be changed, but if a company makes, for example, cigarettes, then no amount of engagement will persuade them to stop doing so. Here, the investor will move straight to an exclusion.
Where it is possible though, many investors prefer to firstly engage with companies over a contentious issue rather than threaten exclusion. That is because once a company is excluded, it is not possible to engage with it, and investors cannot use their influence to seek ESG enhancements.
Divestment presents a similar problem in that it simply transfers ownership from an unhappy investor to a more willing one, and does not address the underlying issue. Divesting thermal coal producers, for example, may make a portfolio more sustainable, but it has no effect on achieving decarbonization overall. Instead, investor efforts have focused on trying to persuade fossil fuel producers to change business models and switch to renewables.
The success of the application of sustainability techniques is increasingly becoming evident in how it is applied to real-life situations. In this chapter, we will provide you with some ‘war stories’ you can use to show clients how important sustainability has become, across all sectors and industries.
The world is changing, so it is important that companies move with the times, or face a certain demise. The corporate graveyard is filled with those that don’t – witness Kodak, which did not transform from film to digital.
Fortunately, investors are usually able to spot sustainability problems in advance and flag these issues with companies – often by using engagement to steer them through. Here are five case studies of how the application of SI is making a difference.
New era for autos: One of the sectors facing the most upheaval is the auto industry as car use is transformed, not least in the phasing out of the internal combustion engine. Since we are not about to give up our cars, auto makers remain highly investible – they just need to move with the times.
Electric or hybrid cars
Engagement with the auto industry has focused mainly on making more electric or hybrid cars. It is already having an effect: electric vehicles are expected to account for 10% of the 80-90 million new vehicles that will be made in 2020, up from virtually zero a decade ago. In tandem with this, the proportion of lightweight materials that makes up electric cars – which do not require heavy transmission systems or gearboxes – is seen rising from 29% in 2010 to 67% in 2030, as the chart below shows:
Sugar is the new tobacco: The fight against obesity is becoming a bigger problem for food and beverage producers, with sugar sometimes now viewed as ‘the new tobacco’. This is backed by some alarming statistics; a bottle of chili sauce, for example, has an incredible 49 cubes of sugar in it. For fizzy drinks, the amount can be even higher.
A backlash against the food and drinks industry has now forced many producers to dramatically lower sugar levels in their products. In 2017, Coca-Cola announced plans to remove sugar from a range of soft drinks altogether, with many major brands now offering sugar-free products, as ‘traffic light’ systems highlighting calories on packets. Those that do not do this face losing business to those producers with healthier products. Engagement has focused on trying to persuade companies to reduce sugar levels, reinforced by increasing regulation in this era.
Oiling the wheels of change: The influence that voting can have was seen to great effect in 2017 and 2018, when investors filed proposals at the shareholder meetings of two oil majors. Royal Dutch Shell and Exxon Mobil had been accused of dragging their feet on what they would do with potential stranded assets – trillions of dollars’ worth of fossil fuels that cannot be burnt in order to meet global warming targets.
A resolution at their shareholder meetings asked them to run stress tests on how their businesses would be affected by the need to meet climate change targets. Investors grouped together to force them through. Both resolutions were subsequently passed with large majorities. Such stress tests are now common practice at Big Oil companies which are facing much higher scrutiny from their shareholders in the post-Paris Agreement era.
When the drugs don’t work: ESG analysis proved useful in spotting potential downside for the corporate bonds of a pharmaceutical company that had slashed its research and development (R&D) budget. Drug makers usually commit 15-20% of their revenue to R&D to ensure a steady pipeline of new products.
However, analysis showed that this company had reduced R&D spending to 3-4%, chasing short-term profits at the expense of long-term value creation. ESG research also revealed excessive executive pay, poor internal controls and huge hikes in the prices of the company’s medicines. All this created a significant downside risk for owners of its credits. The yield on the company’s bonds subsequently rose steeply against its peer group. This also proved the point that unsustainable companies become more expensive to fund.
Lower emissions = lower costs: Evidence that being more sustainable will eventually feed through to the bottom line – even in industries often seen as being environmentally damaging – was seen in a study of mining companies. The study focused on the ‘stripping ratio’ – the amount of material required to extract a ton of ore – which is directly related to the energy and water intensity of the operations involved. It is therefore used as a measure of relative resource efficiency.14
The research found that the miners with lower emissions per unit of material produced also had the lowest cost bases, and that the two were related, since more efficient miners used fewer resources to achieve the same ends. Investors were therefore able to regard emissions per production unit as a valuable indicator of miners’ competitiveness. Other ESG issues remain important for miners though, particularly those operating in emerging markets where safe working conditions and governmental interference have been issues.
To summarize, let us recap on what sustainability investing means. This final chapter highlights the main points from the previous eight.