PI Partnership – Newton Investment Management
RESPONSIBLE INVESTMENT 2.0: A REVOLUTION IN ECONOMIC THINKING
Therese Niklasson is global head of sustainable investment at Newton Investment Management
Why we believe the asset management sector must rethink its approach to sustainability if it is to succeed in helping compa- nies realise a truly sustainable future.
The traditional approach to investment was not designed to tackle the planetary boundaries that are all too apparent in today’s world. Neither was the original form of socially respon- sible investing (SRI). But while the industry has belatedly woken up to its central role in creating a truly sustainable future, we believe a more fundamental overhaul is needed if we are to collectively suc- ceed in tackling the biggest external threats facing society. We know that, in addition to the need for capital to go towards truly sustainable investment opportunities, markets must start factoring in the value placed on negative external consequences created by companies. To us, one of the biggest and most con- sistent market failures is that investors have failed to integrate these considerations for decades. In their defence, this has to a large extent been because govern- ments have been slow to legislate or have failed to penalise those responsible for the negative effects of those external con- sequences. In order to achieve a sustainable ‘revolution’, we believe we also need to undergo a revolution in economic thinking.
The conventional economics that have underpinned invest- ments and fundamental analysis for decades fall short in the face of the biophysical boundaries to our planet, such as cli- mate change, water scarcity, topsoil erosion and loss of biodi- versity, to name a few.
Responsible investment 2.0 At Newton, our long-term strategy with respect to responsible and sustainable investing is focused on this transition. We call it ‘responsible investment 2.0’ but, in reality, it may be ‘respon- sible investment 3.0’.
Over the past decade, our responsible investment team has been supporting our investment teams with dedicated and pro- prietary ESG analysis on companies as a complement to the analysis of external service providers.
20 October 2022 portfolio institutional roundtable: Responsible investing
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