ESG-led investments 'unequivocally' deliver better returns

Investcorp, the alternative asset manager that counts Mubadala Investment Company as its biggest shareholder, said environmental, social and governance-focused investments are likely to outperform traditional ones in the long run because these companies create “strong engagement” with customers and talent.

Companies whose business activities are centred on ESG principles are likely to attract loyal clients, employees and financial backers, making them more successful in the long-term, Rishi Kapoor said at the Abu Dhabi Sustainability Week on Monday.

“When you have those three working for you it shouldn't come as any surprise that in long run, these companies are going to deliver excess returns because they have the competitive advantages in terms of capital, people and customers,” he said.

Investcorp, which was founded in 1982 and has $37.6 billion in assets under management, on Monday released its own 2021 ESG report titled "Responsible Business".

Forty-eight per cent of all new hires at the company were women last year while 32 per cent of its total number of employees are women, the report showed. Forty-five nationalities are represented across the firm and it launched a new policy that requires all shortlisted candidates to be from diverse backgrounds.

Meanwhile, mental health awareness and support has been made available to all employees.

“We have made much progress over the past year, but we are also keenly aware of the scale of the challenge ahead of us both in terms of our own activities as a corporation, and also our role as a provider of capital,” the company said in the report.

“Over the coming year, we will be doubling down on our efforts, particularly with regard to financing the decarbonisation journey, driving more equitable and inclusive employment initiatives, and providing more focused support on enhancing governance practices to those of our portfolio companies that would benefit most from this in the emerging markets,” it said.

“We remain agile in our approach to how we integrate ESG considerations across our investment processes to ensure we stay current and go to where the most pressing problems and opportunities are.”

From its own engagements with stakeholders, Investcorp identified a clear trend that investors are “increasingly keen to align their own core values and beliefs with their investments”, Mr Kapoor said.

“We refer to it a bit colloquially as letting your capital speak for you.”

As a result, investors are seeking greater standardisation in measuring and reporting on ESG goals, and are looking to invest in opportunities that provide innovative solutions to the biggest sustainability issues, he said.

Investments by sovereign investors globally into funds and companies following ESG standards more than tripled last year, Finbold.com and data from industry tracker Global SWF reported.

Investments by sovereign wealth funds in the ESG space surged to $22.7 billion at the end of last year from $7.2bn reported in 2020, while the number of sustainability-linked investment deals at the end of 2021 also rose to 37 from 19 a year earlier.

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