Sustainability Aligns Your Financial and Social Interests

As investors, our priorities tend to serve individual interests. Building wealth. Preserving it. Enjoying it throughout our lives. And sharing it with loved ones.

Yet many of us also see our wealth as a tool for helping make the world a better place for everyone. According to the United States Wealth Report 2014 published by Capgemini and RBC Wealth Management more than half of high net worth investors surveyed said driving social impact was very or extremely important. Indeed, nearly nine out of ten (88%) said it was important.

Philanthropy may be the first thing that comes to mind. Generally speaking, sharing your wealth with causes that are meaningful to you is good personal policy. But you may also take more direct action as an investor if you care about solving urgent problems like climate change, resource scarcity, poverty, disease, income inequality and other ills.

Two things you can do to invest with sustainability in mind are:

1. Direct your capital to securities of organizations that integrate Environmental, Social and Governance (ESG) metrics into all decision making.
2. Shift your focus from short-term returns to long-term returns.

A study conducted by Eccles, Ioannou and Serafeim¹ tracked long-term performance of ESG and non-ESG companies. The study found that $1 invested in a value-weighted portfolio of sustainable firms in 1993 would have grown to $22.60 by the end of 2010. In contrast, $1 invested in a value-weighted portfolio of unsustainable firms over the same period would have grown to $15.40.1 That is s 31.8% difference in performance.

Moreover, the study found the portfolio of ESG firms exhibited comparatively less volatile performance. While past performance does not guarantee future results, this empirical evidence suggests ESG investments may achieve greater returns over time while experiencing lower volatility. So simple changes to how you invest may help make a dramatic impact on both your financial life and the change you want to see in the world.

Investors interested in exploring ESG investing for long-term sustainability may “dip their toes” in the water with just a portion of their portfolios. Think of it as a diversification strategy. For help determining the right asset allocation and securities for your unique personal and financial goals, contact your RBC Wealth Management financial advisor or use the advisor locator tool to find an advisor near you.

¹ Source: Eccles, Ionnou and Serafeim, “The Impact of a Corporate Culture of Sustainability.”

Important disclosure information about Royal Bank of Canada (RBC) and RBC Capital Markets, LLC