It has become increasingly obvious that we as human beings have ignored the fact that we live in a world with limited resources. Currently we live as if we had two planets, not one. That is not sustainable. We also have a long way to go to fulfill the social aspects of the SDGs.
As investment professionals, we can not drive financial performance at the expense of our common future. We therefore need to consider investment performance from a total impact perspective, merging the evaluation of financial and sustainability (ESG) performance. With a merged view of an investment’s total impact performance, we lower the risk of making suboptimal investment decisions.
There are essentially two problems when merging sustainability and financial performance. First, some aspects of a company’s sustainability performance are not captured within the realms of the company financials and consequently referred to as externalities.