Navigate the Science of Sustainable Investing with Sun Tzu’s The Art of War

Environmental issues are top priorities for all five personas, with climate change and carbon emissions ranking top. Other important issues range from addressing pollution and waste management to improving energy and resource efficiency, reducing food and water scarcity, as well as alleviating poverty. 

Though all investors look to enhance returns through sustainable investments, legacy builders and young professionals are further driven by the potential of sustainable investments to hedge against ESG risks whereas the other three personas hope that their investments would be able to make a positive impact.

While many investors have the intention to consider sustainable investments, accessibility, perceived low returns or higher risks and a lack of information remain barriers to entry. Some investors find that most sustainable investment opportunities are too broad and do not speak to their specific values. Others are keen on sustainable investments but find that the lack of standardized and well-documented information makes it difficult to compare opportunities.

At Standard Chartered, we actively address investor barriers by providing clients with clear and transparent information on sustainable investing and how we derive our suite of sustainable investment solutions. At the same time, the bank’s ongoing engagement and education programs help investors debunk misconceptions and address concerns related to sustainable investment solutions. Today, Standard Chartered offers our clients access to sustainable investment products in 16 markets across Asia, the Middle East and Africa.

Regardless of your investor persona, here are four tips from Sun Tzu’s The Art of War to help you start investing sustainably.

1. “In the midst of chaos, there is also opportunity.”

Diversifying your portfolio to include sustainable solutions can improve the resilience of your investments. According to a BlackRock study, 94% of sustainable indices outperformed in Q1 2020’s Covid-19 market drop,^[1] and likewise during market downturns from 2015 to 2018. This year, amid challenging markets, ESG equity funds have also done better, on average, than their non-ESG counterparts. While they are in the negative, in line with the broad market selloff, ESG funds have seen smaller falls in comparison. 

2. “Opportunities multiply as they are seized.”

There is an increased focus on ESG issues, and investors who understand and seize this opportunity can stay ahead of key trends. Take, for example, the theme of climate: the transition to a low-carbon economy is a $29 trillion opportunity. With the ongoing Russia-Ukraine war creating a renewed focus on renewable energy and clean energy, governments and companies worldwide are continuing to sign up to net-zero commitments. Case in point: fears over US energy security helped unlock a historic $369 billion bill for climate and clean energy programs in July 2022. This is the single largest investment made toward climate change in US history and will significantly further the development of the US clean energy industry. With an increase in climate regulation globally, this will also drive the momentum behind climate investing. Standard Chartered has a suite of third-party sustainable thematic funds on its platform, including those with a focus on capturing opportunities around climate change.  

3. “The greatest victory is that which requires no battle.”

Companies that manage their ESG risks well stand to be the winners of tomorrow. A 2019 study showed that ESG controversies wiped $500 billion off the value of US companies^[2], while a report from Refinitiv estimates that $4 trillion of carbon taxes will be paid by firms, which could hit as much as 13% of revenues for companies. ESG factors such as physical climate risks and supply chain disruptions can have a significant material impact on companies if not managed well. This is why Standard Chartered includes trade notes in the products we recommend to our clients to raise their awareness and understanding of related issues so they can make better investment decisions. 

4. “Know yourself and you will win all battles.”

Finally, being clear on your sustainable investing goals is critical.

Some investors are keen on making a difference with their capital and aligning their values with their investments. Others see sustainable investing as an opportunity to build a more resilient portfolio, taking into consideration material ESG factors for both risk management and the capturing of opportunities brought about by macro structural trends. Whatever the objective, it is important that you choose the approach and strategies that best align with the outcomes you target.

As interest in sustainable investing grows, Standard Chartered’s team of experts goes deeper to identify the latest trends and opportunities, helping investors identify compelling solutions to complement their investment goals and portfolios across international markets. 

[1] Blackrock [2] Financial Times