4 Misconceptions about ESG and sustainable investing

Joachim Aelvoet: "It is still a misconception that ESG and sustainable investments go hand in hand with lower returns. We see in our own results, which go back more than 10 years, that this assumption is incorrect. Long term, over a certain investment horizon, that is of course important. It is also logical that in the long term the return is not necessarily lower. An example? According to the Paris Climate Agreement, we must drastically reduce our CO2 emissions. One consequence is that oil companies with a certain percentage of fuel in stock may not be able to use it. This impacts their future profits and valuation. In the short term, you might say that oil companies are doing very well. But in the longer term, the picture is likely to look completely different. Companies that understand what is coming have the potential."

Joachim Aelvoet: "Whether you want it or not, investments have an impact. Always. What you decide is whether that impact is positive or negative. That is why we invest a lot in discussing the non-financial aspects with our clients. We provide you not only with insight into your returns but also into the impact of your portfolio. How much CO2 emissions do your investments compensate? Does your portfolio follow climate goals? In doing so, we focus not only on the ecological aspect but also look at the UN's sustainable development goals."

Joachim Aelvoet: "Compare it to the fourth industrial wave, or more recently, digitalization: they brought a lot of potential for those who got in early, and those who missed the boat went under. Now, with the sustainability transition, we have a similar scenario. We use our expertise as a bank to select the right companies: companies that already score very well on ESG and innovative companies that contribute to forward-looking sustainability themes, such as healthy living, water, waste and recycling, energy efficiency, and safety. The energy transition is more than ever a hot topic due to the current war situation. The majority are companies in the pack. They are certainly not yet the best in the class but have the ambition to contribute to the transition. There is real economic potential, and we expect the greatest acceleration there. We are convinced that technological advancement, product innovation, and process optimization will lead to more profitability, an acceleration of profit growth, and ultimately a higher market valuation."

Joachim Aelvoet: "There is certainly awareness, but also caution and doubt. We have seen a significant acceleration, mainly due to the impact of the coming generation. If your child skips school to protest for the climate, you as a parent start thinking too. Although there are indeed still doubts. It is not an easy subject. Do you invest in nuclear energy, for example? There is no clear answer to that. And that is the conversation we really want to have with our clients. The key message is this: find the right sparring partner who will discuss it with you and guide you."