Profit with purpose: sustainable investment is here to stay

How to live the best life in the best society? Such questions spark joy for our Investment Advisor Maila Schaerer and her clients. With a focus on advisory mandates in sustainable investment, Maila explains how her work is future-proofing the financial markets.

Based in Julius Baer’s Geneva office, Maila Schaerer describes her role as not only advising but also educating her clients on sustainable investment. A life-long fascination with humans and the systems we create led Maila to study international affairs and governance at university – a fitting preparation for her current role with its combined study of economic systems, laws and regulations, political science and history. Falling into finance happened more or less by accident, but Maila quickly understood the potential financial markets have to bring about far-reaching and long-term change.

Adding purpose to profit
The possibility to partner with change-makers is what drives Maila. Her role provides an opportunity to educate wealthy people about using their assets to create value not just for themselves but for society as a whole. “There’s a quote by Gloria Steinman – ‘It is more rewarding to watch money change the world than watch it accumulate.’ And more and more clients agree,” explains Maila. “It’s much more exciting and rational to allocate investments to purposeful ideas and innovations than have cash sitting in an account doing nothing, or worse supporting investments that are detrimental to our environment or society. The financial markets are a very powerful and efficient tool. Properly designed, they can bring strong incentives for change and improve the current systems”.

It’s persistently proven that integrating ESG indicators into traditional financial analysis enhances financial performance.

In this context, to incorporate effective Environmental, Social and Governance (ESG) standards into the marketplace is common sense. As Maila points out: “Environmental challenges and inequality go hand-in-hand. In a world where resources are limited, we have to change the way we consume and allocate capital if we and our children are to breathe clean air, swim in the ocean and live in stable societies relatively unriddled by climate catastrophes, loss of nature and crippling poverty.” 

A new era of investment
With climate activism dominating global news headlines and younger generations mobilising their political voices, Maila believes we’ve entered a new era of investment - and it’s here to stay. “It’s not a question of ‘why’ invest sustainably anymore,“ she explains. “ESG investment approaches are now mainstream and it’s persistently proven that integrating these indicators into traditional financial analysis enhances financial performance. The major question is now ‘how’ to transform the financial system so that the notion of value is redefined and the according incentives are established and priced effectively. It’s happening. Innovative corporations are embracing a ‘circular economy’. Regulatory reforms such as the upcoming standardised EU taxonomy for ESG will increase consistency and transparency. And advancements in artificial intelligence are transforming the capabilities of rating agencies.”

Good business sense
Considering the sheer amount of assets under management, sustainable investment is in no way niche or a nice-to-have. The United Nations Principles for Responsible Investing have been signed by a large number of major global financial institutions, with signatories representing over USD 83 trillion in assets under management. Big business is looking to sustainable investment for improved risk-adjusted returns.

“According to a new study from the Bank of America, ESG signals are the best indicators for future earnings risk or earnings-per-share volatility,” Maila says. “Fifteen out of seventeen S&P 500 companies that went bankrupt between 2005 and 2015 reported poor ESG scores five years prior. This is very significant since large loss avoidance is a great contributor to financial performance over time.”

Clients of the future
Investors began seeking greater personal involvement in their portfolios following the 2008 financial crisis. Leading the pack are millennials, including the next generation of ultra-high net-worth families, and female investors whose numbers are rising due to the gender equality movements of recent decades. “Many of those who have grown up in a post-materialistic world – the kids of baby boomers who grew up with wealth and luxury and their needs satisfied – want to see their values reflected in all aspects of their life,” Maila explains. “They want their investments to improve the world or at least not to harm it – so the means start to count.”

Maila firmly believes we all gain when profit-with-purpose is prioritised. Once again she refers to an apt quote, this time from Peter Bakker, CEO and President of the World Council for Sustainable Development: “Business as usual is economically risky, environmentally stupid, socially unacceptable and legally dangerous.” By providing sustainable investment advisory services, it’s clear that ‘business as usual’ is something Maila has her sights set on transforming.

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