Summary
Environmental, social, and corporate governance (ESG) are the three recognised strands of the approach. Many of the world's largest companies have demonstrated ESG credentials. SRI portfolios have had a tough three years, due in part to trends in the energy sector. But long-term performance is strong compared to non-SRI investing.
The FCA’s stated goal is to ensure that “financial products that are marketed as sustainable should do as they claim and have the evidence to back it up”. Rules around SRI and ESG are likely to be developed further as the sector expands and matures.
SRI is now very much a core investment approach and not a short-term trend. According to research from Bloomberg Intelligence, global ESG assets surpassed $30trn (£24trn) in 2022 and are on track to surpass $40trn by 2030.
The best way to illustrate this is the performance of the MSCI World SRI index versus the MscI World, the most recognisable measure of developed market equity performance. The table below shows the performance in dollar terms, over one, three, five and 10 years to end May 2024.