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We know everyday activities can have effects on the world around us. Where did our food come from? Who made our clothes? Should I drive to work, take the bus, or cycle?
How do the things we buy and the actions we take affect the planet and the people who live on it? Are they sustainable in the long run, or do they do more harm than good?
These considerations also apply when investing, particularly where investment decisions include consideration on how best to invest in a “responsible” way.
Investing responsibly to manage risk
Responsible investing is becoming more universal, because many investors now believe that integrating environmental, social, and governance (ESG) considerations into investment analysis and decision-making processes can identify companies that are better at managing ESG-related risks and are better prepared for the future.
At Rest, we agree! We believe ESG factors can affect a company's performance and market value, and that business and investment performance are unlikely to thrive in a world of poverty, inequality, and climate stress. For this reason, we use responsible investing as a risk management tool across our investment process.
How do we define responsible investing?
There are many ways to define it and describe it. You may have heard the terms sustainable investing, ethical investing, and/or socially responsible investing. They all describe a collection of approaches that aim to align investments with member or customer values, reduce risk, and achieve strong financial returns while contributing positively (and/or not contributing negatively) to society and/or the environment.
Consistent with our role as a long-term investor, Rest has adopted the PRI’s* definition of responsible investment: “an approach to investing that incorporates environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns”.
*The Principles of Responsible Investing (PRI) is a UN-supported network of investors that works to promote sustainable investment through the incorporation of ESG factors into their investment and ownership decisions.
Why does responsible investing matter?
Among the benefits that can arise from a responsible approach to investing are:
Risk management
Companies that fail to manage ESG risks can face reputational damage, legal challenges, fines from regulators, and disruptions to their operations. Responsible investing takes these factors into account, potentially reducing exposure to such risks and helping make an investment portfolio more stable and resilient.
Long-term performance
More sustainable business practices may lead to innovation, more efficient operations, and better resource management, all of which can contribute to profitability and shareholder value over time.
Positive outcomes
Responsible investing offers a way to contribute positively to addressing global challenges like climate change and social inequality. By directing capital (money to be invested) towards solutions — such as renewable energy, sustainable agriculture, or affordable housing — investors continue to seek financial returns while making a tangible impact.
Market opportunity
New market opportunities are emerging as a result of societal shifts towards sustainability and social equity. Growing developments in sectors like clean technology and sustainable infrastructure are promoting sustainability and offering investors new opportunities for potential financial growth.
Community expectations
Consumers and employees are increasingly expecting companies to operate responsibly. Brands with strong sustainability credentials can attract loyal customers and dedicated employees, ultimately contributing to a company’s competitive advantage and bottom line.
Mitigating systemic risk
Systemic challenges like climate change and modern slavery can affect entire economies and global markets. Investors aim to mitigate these risks by supporting companies that are actively working to address these challenges.
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Rest invests in a diverse range of assets, but we don't invest in every type of asset. Learn more about the assets that Rest does not invest in and why.
