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Responsible investing

Read about the advantages of incorporating responsible-investing practices into your portfolio.

Responsible investing





Competitive advantages exist for both investors and issuers

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 We see opportunities in investing in sustainable food systems, highlighted by recent IPOs and sales in the plant-based “meat” industry. We also see good possibilities in climate resilience investments focused on physical assets such as real estate that are positioned to proactively manage climate risk.


Investor interest and global growth of professionally managed responsible assets continues to rise, with investments focusing on environmental, social and governance (ESG) practices reaching $30.7 trillion by the start of 2018, a 34% increase since 2016. We have also seen strong growth in impact investing, which seeks to generate both a financial return and positive, measurable social and environmental impact, with assets under management now estimated at $500 billion across asset classes, according to the Global Sustainable Investment Alliance.

ESG integration is about much more than aligning investments with values. In our view, ESG investing allows for a differentiated focus on producing investment returns. For example, we think investments in utility companies deploying strategies that reflect physical and transition climate risk factors have greater performance potential, and companies that have high-quality boards are better able to ensure long-term shareholder value creation for investors. And in the bond market, credit rating agencies continue to increase their ESG focus with Moody’s, S&P and Fitch deploying new ESG-scoring methodologies.

Scrutinizing ESG trends and generating actionable insights at the portfolio level requires focused and thoughtful research. And it should cover more than the specific companies, regions and countries that comprise specific investments. In our activities, for example, we also apply a broader stakeholder lens across companies’ global operations. For example, as globalization continues, companies and consumers are increasingly focusing on the ESG components of global supply chains, including an emphasis on maintaining high standards of fairness, safety and inclusiveness in the workplace.

Dedicated RI capabilities will remain a critically important component of portfolio positioning for the most successful investment managers.


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Endnotes


Sources 



All market and economic data from Bloomberg, FactSet and Morningstar.



The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. 


Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible. 


All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. 


Glossary


S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. 


A word on risk 


All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Foreign investments are also subject to political, currency and regulatory risks. These risks may be magnified in emerging markets. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Socially Responsible Investments are subject to Social Criteria Risk, namely the risk that because social criteria excludes securities of certain issuers for non-financial reasons, investors may forgo some market opportunities available to those that don’t use these criteria. Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the use of leverage, short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits. Alternative investments are not suitable for all investors and should not constitute an entire investment program. Investors may lose all or substantially all of the capital invested. The historical returns achieved by alternative asset vehicles is not a prediction of future performance or a guarantee of future results, and there can be no assurance that comparable returns will be achieved by any strategy. 


Nuveen provides investment advisory services through its investment specialists. 


This information does not constitute investment research as defined under MiFID. In Europe this document is issued by the offices and branches of Nuveen Real Estate Management Limited (reg. no. 2137726) or Nuveen UK Limited (reg. no. 08921833); (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3BN), both of which entities are authorized and regulated by the Financial Conduct Authority to provide investment products and services. Please note that branches of Nuveen Real Estate Management Limited or Nuveen UK Limited are subject to limited regulatory supervision by the responsible financial regulator in the country of the branch.