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Investment Management

Ethical investing

As investors become more socially and environmentally aware, ethical investing is increasing in prominence and popularity. In fact, many so-called ESG (environmental, social and governance) factors play a part in the management of all funds, not just those with an ethical ‘badge’.

The ethical approach

Approaches to ethical investing differ widely. From a ‘negative screening’ approach, where a fund won’t invest in companies that are involved in certain activities (such as animal exploitation and poor environmental practises), to a more targeted approach, where investors actively seek out firms that make a positive social impact.

Does investing with a conscience mean sacrificing returns?

No investor wants to lose money, and ethical investors are no different. The integration of ESG factors within the investment process can often mean investing in businesses that have less inherent risk, and better longer-term financials. Given the breadth of research which supports outperformance by including ESG factors, there is the potential to outperform, particularly when different ethical approaches are combined.

The Sanlam approach

We like to offer a range of solutions, and our ethical portfolios are proving to be increasingly popular with clients. While an ethical portfolio might look different to our core models due to the nature of the approach, we manage it in the same way as we do all our portfolios – targeting returns, while minimising risk and managing volatility.
 
Funds are assessed qualitatively and quantitatively and are selected according to their investment style. Ethical funds have tended to adopt a growth-style over time as they typically avoid traditional value sectors such as banks and mining. With our approach, we moderate risk by managing position sizes to avoid high concentration to specific styles. This approach also applies to our regional equity exposures and bond fund management. 
 

Ethical Portfolio Brochure

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Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.