No, responsible investing does not necessarily mean lower returns, especially when investing for the long term. Responsible investing is an approach designed to protect, and possibly enhance, long-term risk adjusted returns through effective integration of ESG risks into investment decisions.
There is now convincing evidence that ESG factors can – and do – affect investment risks and returns across a range of asset classes. Active stewardship, particularly company engagement, can also encourage more sustainable practices and enhance risk management, which can create value for investors.
Certain ESG factors are likely to become more material to investment performance over a medium to long-term time horizon due to increased uncertainties around how sustainability issues like climate change will affect society and economies.