Investor Focus on Sustainability Is About Managing Risk

By: Ron O’Hanley

February 2020

A core part of an investment manager’s role is to identify, evaluate and manage risk. Long-term investors, whether they are index managers or the sponsors of pension plans and other long-term pools of capital, must consider risks that could impact the value of their investments over extended time horizons.

What does a warming planet with rising sea levels mean for owners of coastal commercial property, agricultural companies in Australia or fossil fuel companies facing competition from renewables and rising demand for electric vehicles? No one knows for sure. But these are sustainability issues managers must consider in making an investment decision, regardless of their personal opinions about climate change or any other sustainability issue. Sustainable investing is about value, not values and is a key consideration when managing risk.