Many equity investors want to help create social benefits while generating strong returns. Deploying a clear investment process that draws on the UN Sustainable Development Goals and integrates environmental, social and governance (ESG) factors in research can help investors achieve these twin goals.
Building a sustainable equity portfolio is no easy task. It requires a thorough process that can sift through thousands of global firms to identify those that are really making a difference on ESG issues. Equally important, it requires disciplined financial analysis to make sure that an ESG-focused target company is a good long-term investment.
Social Benefits and Return Potential
Apollo Hospitals, an Indian healthcare provider, provides a good example. The company operates the largest chain of private hospitals and pharmacies in India. Two years ago, we traveled to India to find out how the Apollo is helping fill the gaps where India’s public healthcare system has failed to deliver. For responsible investors, the company is a great example of an opportunity to help create social benefits while also generating profits.
With one of the country’s most trusted healthcare brands, Apollo is benefiting from rising demand for hospital beds. Its innovative business model includes a telemedicine command center to connect rural clinics with doctors in larger cities. Our research in 2017—including a grassroots meeting with consumers—gave us confidence that Apollo was poised for sustainable revenue and earnings growth.
A Blueprint for Responsible Equity Investment
Finding companies like Apollo requires a clear blueprint for a sustainable investing plan. Investors can start with the Principles for Responsible Investment (PRI), an independent network supported by the United Nations and endorsed by more than 1,800 signatories across the global financial industry. In a report published in October 2017, the PRI outlined three pillars of responsible investing (RI) practices: thematic asset allocation, ESG integration and active ownership (Display 1).