Andy Howard, Global Head of Sustainable Investment at Schroders

Headlines surrounding sustainability and sustainable investment have clearly shifted. During 2021-22, coverage was almost universally positive, sustainable investment fund performance had been strong across the market and inflows into sustainable products outpaced a wobbling market for fund investments.

Since then, coverage has turned. Typical sustainable investment fund performances have wavered, inflows into those funds have softened, political rhetoric has become more critical and media headlines have become more negative.

In practice, neither the highs nor the lows are representative of the trends, or the fundamental importance of sustainability to the investment industry. The underlying trend is more important than the fluctuations around it.

The chart below plots sentiment toward sustainable investment over recent years. We have used a news aggregation service to extract all stories featuring “sustainable investment” since 2016 and a sentiment classification service to determine the positive or negative tone of those stories.  By multiplying the volume of stories by the average sentiment in each month, we can gauge fluctuations in media views of the field.

Two things stand out. Firstly, that during 2021-22, sentiment was far stronger than is the case today, reflected in our anecdotal experiences and the “hotness” of hiring into sustainable investment roles at that time.  Second, and more importantly, the trend is firmly upward over the period we have been able to examine.

Strength of sentiment toward sustainable investment, indexed

Source: Schroders calculations. We extract news stories from a wide range of sources based on the “sustainable investment” search term and use a sentiment classifier to determine the strength of sentiment toward that topic in each story.  We then multiple the number of stories in each month by the average sentiment in that month to calculate the above index.  Chart is rebased so that the average “strength of sentiment” is 100 over the period shown.

Sustainable investment will again become a “hot topic”.  The areas of focus, the investments that benefit and the acronyms used may look different but we believe the focus will return.  The forces that shape our conviction in the importance of sustainability to the investment industry and our clients are only intensifying.  Climate change, nature loss, social unrest are growing challenges over which the investment industry’s awareness – and ability to analyse – are rising with increased corporate recognition and disclosure.

At Schroders, we take a long term view, focusing on trends that will shape the years ahead rather than shorter term noise.  Future demands will look different to those we have seen in the past –  less focus on commitments and aspirations and more on practical implementation and delivery – but the importance of sustainability to effective investment decisions and our clients’ interests is unchanging.

ENDS