Sustainable investing doesn’t have to mean sacrificing returns. But fund manager Will McIntosh-Whyte argues even the most noble companies need solid long-term fundamentals to be truly sustainable.
Last summer I was invited to a close friend’s wedding. While it was an intimate affair due to social distancing restrictions, the dress code was still formal.
As someone who used to wear a suit to work every day, you’d think it would have felt as familiar as a well-worn pair of shoes. In fact it felt awkward and unnecessarily fussy. Did I really wear this every day?
Fast forward to today, and that was the only time I have worn a tie in the past year. It’s not like my ties were getting much of an outing prior to the pandemic, either – I had jettisoned many of them long ago thanks to increasingly more relaxed business dress codes. But the pandemic has certainly accelerated their status closer to that of the dodo.
Does anyone wear a tie these days apart from weddings and funerals? Or outside of the Royal Family and Parliament? It is no surprise train stations and shopping malls no longer feature those Tie Rack outlets that were ubiquitous from the 1980s to the early 2000s.
It was with this corporate failure in mind that I was reminded of my friends’ idea to launch a tie company - with a sustainability theme - they wanted to devote 10% of the company’s profits to support wildlife under threat.
Great cause. Questionable business idea. Would there ever have been any profits to donate given the ongoing demise of the tie?! Thankfully the idea never made it past the drawing board, and my friends stuck with their more successful day jobs.
The thing is, it doesn’t matter how environmental or socially responsible a company is if it’s not going to be around for the long term. Tie Rack failed not only because its product was no longer essential, but also because people were gradually buying everything online rather than in physical shops.
Given how the pandemic has obliterated the daily commute as we know it, there’s even less need for both neck ties and the kiosks that sold them in train stations. No amount of environmental awareness, social responsibility and good governance is bringing ties back.
Where I think my friend were on the money, was recognising customers increasingly care about sustainability, and the values of the businesses they buy from. And increasingly this is translating into their financial decisions, where investors want to align their investments with their values. However, whilst investors want to do good, they still need to achieve their financial objectives.
Our new Rathbone Greenbank Multi-Asset Portfolios aim to allow investors to do exactly that, focusing on companies that are not only benefitting people and the planet, but also have strong balance sheets, quality management, genuine barriers to entry and tailwinds behind them that are driving growth, in order to meet those long term objectives. Equally we are investing in companies that are looking after all of their stakeholders, whether it’s employees, customers, shareholders or society in general.
We want companies that display strong sustainability credentials, but must also have viable long term business models. Equally in today’s world the two are inextricably linked: if you behave badly, you are likely to face repercussions of some sort. This may be governments stepping in with regulation, customer boycotts or investor revolts over supply chain issues or treatment of workers. The corporate world is quickly learning that you reap what you sow.
Similarly, being a great company is no good if you fail to innovate and adapt in a changing market. Anyone who has bought a tie in the past few years will know this, because they didn’t get it from Tie Rack.