Investing with a conscience | The Edge Markets

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In the days before Covid-19, you might have been among the many investors who paid little attention to a company’s sustainable business practices. No, it was a corporation’s bottom line that mattered — for you and many others, this was the sole yardstick in determining whether or not to invest. Then along came Covid-19, claiming both jobs and lives, and significantly altering everyone’s outlook on life, including yours.

Environmental, social and governance (ESG) is no longer a niche topic now, with heightened awareness about issues on climate change, human rights and adequate access to education.

Investing with a conscience — putting one’s money into companies that strive to have a positive impact on society and the environment in addition to profitability. But what exactly is ESG investing, and why is it so important for businesses and investors?

Preserving both profit and the planet

ESG investing is an approach that assesses a company based on its long-term commitment to addressing ESG challenges alongside traditional financial metrics. The criteria may include policies on energy use, diversity at the workplace, corporate transparency and accountability of a company’s leadership.

There may be concern that companies with a sustainable focus will churn out lower returns compared to corporations that prioritise financial performance. However, Munirah Khairuddin, CEO and country head of Principal Malaysia (Principal), says this is a misconception.

“Sustainable investments, especially equities, have the potential to outperform the general market in many circumstances in the past, especially in the long run and during volatile markets”, she explains.

Sustainable investments, especially equities, have historically proven to outperform the general market, especially during volatile markets.”
— Munirah Khairuddin
CEO and country head of
Principal Malaysia

ESG strategies are increasingly important to an organisation’s resilience and long-term performance. For starters, embedding ESG as a central component of an organisation’s business model may help enhance its reputation, which may affect the organisation’s value. Strong ESG credentials may suggest that a company is connected to issues that matter to the community.

A focus on corporate social responsibility may potentially help an organisation attract and retain both employees who want to work for an ethically-run company and customers who may prefer to support a company that is aligned with their values.

With global recession fears and geopolitical uncertainties flaring up, investors are also becoming increasingly concerned, with many choosing to go long on ESG-related investments while taking a breather in other segments of their portfolio.

Growing a sustainable and secure society

In these tumultuous times, it is crucial for companies to create and sustain value for all its stakeholders — including employees, customers, suppliers and communities — in order to help pursue long-term success. Principal understands this.

“We want to foster a world in which financial security is accessible to all while doing right by our customers, communities and the planet. Our mission is ever more relevant in these times, when people are reeling from the impact of Covid-19,” Munirah says.

This is why Principal has made sustainability commitments advocating for security and inclusion to create opportunities for future generations.

Putting its clients’ best interest first, Principal believes in offering options that support both their values and financial goals. It has focused on converting and launching new funds that promote environmental or social characteristics, or have an objective that includes sustainable investment outcomes.

For instance, Principal launched the Principal Asia Pacific Renewables Fund, which invests at least 70% of its total assets in shares of the region’s renewable energy companies. There is also the Principal Global Sustainable Growth Fund, which has exposure to shares of companies worldwide that embrace strong ESG values in their businesses. Another offering is the Principal Sustainable Dynamic Bond Fund, which invests in a portfolio of primarily debt instruments in Malaysia with allowable exposure in global markets.

Supporting UN’s SDGs

In 2015, the United Nations (UN) created 17 Sustainable Development Goals (SDGs) as an urgent, universal call to action to end poverty, improve health and education, reduce inequality, and spur economic growth.

Principal’s goal is to align its ESG strategies with some of the SDGs to include addressing climate change, ensuring good health and promoting well-being for all as well as inclusive and equitable quality education. Principal also aspires to support efforts to achieve gender equality and to reduce the inequalities within and among countries.

Another Principal goal is the promotion of sustainable and inclusive economic growth, full and productive employment and decent work for all. Equally relevant to Principal is the building of resilient infrastructure, the promotion of inclusive and sustainable industrialisation, and fostering of innovation. Principal is also committed to strengthening the means of implementation and revitalising the Global Partnership for Sustainable Development.

By aligning Principal’s vision with the SDGs, Principal is ensuring that it maximises its contribution to the global collaboration to help make the world a better, more equitable and prosperous place.

Munirah says, “In response to the growing consciousness around sustainability issues in Malaysia, we continue to develop innovative solutions that build, protect and advance the financial well-being of our customers, while helping the people and the planet at the same time.”

To learn more about Principal and its commitment to sustainability, visit https://www.principal.com/sustainability/

The information in this article has been derived from sources believed to be reliable, however, we do not independently verify or guarantee its accuracy or validity. It contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The information it contains does not take account of any investor’s investment objectives, particular needs or financial situation. Investors should consider whether an investment fits their investment objectives, particular needs and financial situation before making any investment decision. The data presented is for information purposes only and is not a recommendation to buy or sell any securities or adopt any investment strategy. This material is not intended to be relied upon as a forecast, research, or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. All expressions of opinion and estimates in this article are subject to change without notice. This article is not intended to be, nor should it be relied upon in any way as a forecast or guarantee of future events or investment advice regarding a particular investment or the markets in general.

Environmental, social and governance (ESG) responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilised, or judgment exercised, will reflect the beliefs or values of any one particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may or may not be accurate or complete, and such information is used to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. ESG, while a component of our investment analysis, is only one part of the overall assessment in our decision-making activities. ESG criteria may present additional advantages or risks and does not protect against market risks or volatility. You should not make any investment assumptions based solely on the information contained herein. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.





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