Sustainable investing has gathered rapid momentum in recent years. This impulse is shifting the goalposts for investments, as investors are increasingly looking for solutions that make an impact alongside financial returns. Asset managers and owners can reach these objectives through active ownership and capital allocation. With active ownership, they can pursue their sustainability goals by voting at shareholder meetings and engaging in constructive dialogue with firms to steer their behavior. They can also vote with their feet, through their capital allocation choices.
Excluding companies, for example ‘sin stocks’, from investable universes is a popular way to make an impact through capital allocation. However, sustainable investing is not limited to negative screening, as it also entails taking larger positions in sustainability leaders. This can be done with the integration of environmental, social and governance (ESG) indicators in investment processes, targeting carbon footprint reductions in portfolios, or aligning investments with the United Nations’ Sustainable Development Goals (SDGs).
Sustainable investing is not limited to negative screening, as it also entails taking larger positions in sustainability leaders
There can be many reasons to divest from unsustainable firms and shift capital towards more sustainable ones. Some investors are content with simply disassociating themselves from certain businesses, such as the tobacco industry, regardless of whether this will have any effect on the actual production and consumption of tobacco products. Others see it as a signaling tool, even though they acknowledge that this approach likely has no direct impact on the related companies. The third and most ambitious reason is to allocate capital in a way that supports sustainable companies and hurts unsustainable ones. This approach can incentivize the latter to improve their corporate behavior.
Our analysis examines how sustainable investing has affected capital flows and the financing needs of companies. In principle, divestment would negatively affect the targeted firm, but this mechanism is actually not so clear-cut. Divesting results in a transfer of ownership from one investor to another, which has no direct impact on the firm. However, divestment may hurt companies indirectly by increasing their cost of capital. With this in mind, we argue that the ultimate impact of sustainable investing on listed companies is best evaluated by examining the primary market, i.e. new issues of bonds and stocks.
In our study, we considered all stocks in the MSCI All Countries World Index over the 2010-2019 period. We classified a company as an equity issuer if its number of shares outstanding increased by at least 10% over the year. Similarly, we categorized a company as a debt issuer if the book value of its debt increased by at least 10% over the year. To distinguish between sustainable and unsustainable businesses, we used a broad range of metrics, namely ESG, carbon footprint and SDG dimensions.
Our analysis showed no evidence that fresh capital flowed more towards sustainable firms than towards unsustainable ones
Our analysis showed no evidence that fresh capital flowed more towards sustainable firms than towards unsustainable ones. More specifically, it appears unsustainable companies faced no obstacles in raising funds in public markets. Indeed, the sustainability profile of equity issuers was generally similar to the broad market, while debt issuers even tended to have a below-average sustainability profile. Moreover, our results were stable over time. Capital did not flow more towards sustainable firms in recent years than before.
Therefore, our results suggest that sustainable investing has not been able to starve unsustainable companies from fresh capital over our sample period. We acknowledge that if sustainable investing continues to grow, it may become increasingly hard for unsustainable firms to obtain fresh funding in capital markets. But how much growth would be needed for that, and whether such a scale is realistically attainable, remain open questions.
To deprive unsustainable companies from fresh capital, sustainable investing needs to become ’business as usual’ in the investment community.
当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。
商号等： ロベコ・ジャパン株式会社 金融商品取引業者 関東財務局長（金商）第２７８０号
加入協会： 一般社団法人 日本投資顧問業協会