“You can change without growing – but you can’t grow without changing.”
That line was shared with me recently by a financial planner, and it struck a real chord. It sums up not just a personal truth, but the journey we’ve been on as a team at EQ Investors over the last few years.
For more than a decade, my colleagues and I have been building and managing sustainable investment portfolios – both model portfolios and fully bespoke ones. Over that time, we’ve watched the world, the economy and our clients’ expectations shift dramatically.
The rise – and wobble – of enthusiasm for sustainable investing
In the years leading up to the COP26 climate summit in Glasgow, interest in sustainable investing surged. Financial advisers and their clients weren’t just driven by environmental or social concerns, many also saw strong financial reasons to invest this way.
But the world changed quickly. Russia’s invasion of Ukraine, followed by sharp rises in interest rates, created a far tougher backdrop for sustainable portfolios.
The types of companies and sectors that sustainable funds tend to avoid performed well, while many that they favour struggled. Returns didn’t keep pace with more traditional portfolios, and for some investors, confidence wavered.
That raised a difficult but important question: what should sustainable investing look like as it matures?
The big choice: cyclic winners or long-term resilience?
As a dedicated sustainable investment manager, we faced two clear paths:
- We could build strategies that shine in some years and lag in others – essentially accepting big performance swings.
- Or, we could redesign our approach so that sustainable portfolios can hold their own in a range of economic environments, aiming for returns that stay broadly in line with mainstream markets.
We chose the second option.
Why? Because if sustainable investing is ever going to scale and play a meaningful role in financing the social and environmental transition we urgently need, it can’t just work in the good times.
It has to meet people’s financial expectations too, both in the short term and over the long haul. To us, this is sustainable investing’s “coming of age” moment. Call it Sustainable Investing 2.0: an approach that keeps purpose at the core, but pairs it with greater resilience.
Growing up, sustainably
If I’m honest, this shift hasn’t just been about investment theory, it’s felt personal too. The idea of “growing up” in how we approach sustainable investing is underscored by the below photo, which reflects the theme of learning, adapting and maturing.
That’s exactly where sustainable investing is today. It’s not about abandoning values, but about strengthening the foundations so that those values can drive long-term impact.
And if growth requires change, then that’s a challenge I’m glad we’ve embraced.
