Sustainable investment – good for your assets and for the planet
The increasing shift towards sustainable investments is not just an ethical choice but is now recognized as a significant avenue for attractive long-term returns. Per the full note from Nordea, sustainable investments have become almost mainstream among both institutional and private investors, driven by enhanced investor sophistication and a growing trend towards responsible investing. This momentum is expected to positively influence returns for years to come, as highlighted by Kerstin Lysholm, head of Investments at Nordea. Consensus views show varying targets among firms, with some leaning into the sustainability theme, while others remain cautious.
What the desk is arguing
The desk argues that sustainable investing is increasingly being recognized for its potential to deliver competitive returns alongside positive societal impacts. Per the full note from Nordea, this evolving landscape reflects a significant societal movement that investors are capitalizing on, effectively challenging the outdated notion that sustainability incurs a cost in return.
Supporting evidence from Nordea indicates that the demand for sustainable investments will continue to grow, as more investors seek to align their portfolios with sustainable principles, which has led to investments now being viewed as potentially lucrative rather than a compromise. With sophisticated strategies emerging, investors can aim at achieving returns comparable to or greater than traditional market averages.
Where it sits in our coverage
Our consensus target for sustainable investment engagement stands at 1.075, within a range of 1.04 to 1.12. Specific firms like jpmorgan are aligned at a target of 1.10 for Mar-26, while bofa offers a contrary stance with a more conservative target of 1.04 for the same tenor.
This view aligns with broader market expectations, as sustainable investments gain traction. The desk's position is located within the upper part of the consensus range, indicating a more optimistic outlook relative to some firms.
How other firms see it
A number of firms remain aligned on the promising future of sustainable investments, including jpmorgan. Conversely, bofa expresses a more cautious perspective regarding sustainability's direct impact on returns.
In the context of currency pairs, the trajectory of EUR/USD aligns with broader shifts in sustainable investment sentiment, demonstrating how macroeconomic conditions and investor sentiment intertwine with sustainability themes.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Sustainable investments are gaining mainstream acceptance as a profitable avenue rather than purely ethical.
- 02Nordea reports a significant shift in investor sentiment towards seeking returns on sustainable companies.
- 03The sophistication of sustainable strategies suggests they can match or exceed traditional capital market returns.
- 04The consensus target suggests optimism in the sustainability theme, with some firms remaining cautious.
Market implications
Traders should closely monitor the EUR/USD trajectory as a reflection of broader investor sentiment towards sustainable investments. The market's reaction to corporate earnings reports emphasizing sustainability will also be a key signal for positioning.
Risks to this view
Potential risk factors include a significant economic downturn or shifts in regulatory frameworks that could undermine the perceived stability of sustainable investments. Additionally, any signals from major central banks prioritizing traditional investment sectors over sustainability may reverse current positive trends.
ESG Sustainable investment – good for your assets and for the planet 16-09-2020 At Nordea we are experiencing growing interest in sustainable investments among our customers. And whereas interest previously sprung from ethical or climate considerations, we are now seeing broad interest in sustainable companies as an attractive long-term investment theme. Ten years ago, few investors thought about sustainability when planning their investments.
But today sustainable investment is a clear investment trend, resulting from a strong movement in our society. In fact, it has now reached a level where sustainable investment has almost become mainstream – not just among major institutional investors but also for many private investors. Is it possible to obtain attractive returns on sustainable companies?
It used to be a widely held belief that investors had to forego a high return if they wanted to invest sustainably – that was in other words the price of a clear conscience. That might have been true once, but according to Nordea’s research, that does not at all have to be the case today. “The strength of the trend is important when assessing future returns on sustainable investments,” says Kerstin Lysholm, head of Investments, which is the team that decides Nordea’s investment strategy. Kerstin continues: “We believe that the strong and growing interest in sustainable investment will affect returns in a positive direction for many years to come.
Moreover, sustainable investment strategies have become more sophisticated and now often deliberately aim at securing investors returns in line with the market – or higher – at the same risk,” says Kerstin. Invest long term – invest sustainably Many private investors tend to focus on day-to-day market fluctuations and forget the longer view when they invest. However, at Nordea we are experiencing growing interest in long-term investments.
And according to Kerstin it is hard to ignore sustainability as a theme: “If you’re an investor with a long-term investment horizon, you should definitely look into sustainable investments where we see strong future potential. And although day-to-day ups and downs in the markets get a lot of attention from the media and investors, you should focus at least as much on what will likely happen in the long term in order not to damage your long-term return. Investors who ignore sustainable investments are simply making a mistake,” concludes Kerstin.
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