One of the key questions for investors nowadays is a fundamental one: Do they need to choose between financial growth and having a positive impact on society? There is no longer any doubt that the answer is ‘no’.
ESG (Environmental, Social, and Governance) funds have the potential to yield strong financial returns, while also offering hope as they consider sustainability, ethics, and responsible corporate behaviour. These are compelling investment options that benefit not only the planet and people but also the bottom line. APS Bank has always been a community-centric bank, and there is no doubt that ESG funds are perfectly aligned with this vision. The APS Regular Income Ethical Fund, launched more than 10 years ago, was the first of its kind on the local market.
Now re-branded as the APS Ethical Fund, APS Head of Investment Management and Managing Director of ReAPS Asset Management Ltd, Josef Portelli reassured that the main features of the fund remain the same: “ESG funds are different from more traditional investment options. They integrate environmental, social and governance factors into their investment decision-making processes. This means that a company has to commit to sustainable practices, social responsibility, and fit-for-purpose corporate governance,” he explained.
Why are such funds increasingly popular with investors? Portelli explained that investors are increasingly looking beyond short-term profits, and instead also consider the long-term viability of investments, seeking companies that mitigate environmental risks and address societal challenges.
“Our tagline at APS Bank for this product is ‘your investments, your impact’ as by investing in these products, you can reflect your commitment to these fundamental questions.” The decision-makers responsible for the funds cover a range of issues. ESG funds typically focus on industries promoting renewable energy, waste reduction, clean technology, and sustainable agriculture. Moreover, ESG funds embrace social responsibility by investing in companies that uphold fair labour practices, human rights, and diversity and inclusion.
The role of ESG funds becomes increasingly crucial. By integrating sustainability considerations into investment decisions, investors have the power to drive positive change and foster a more equitable and sustainable future
“By allocating capital to the right enterprises, investors contribute to the transition toward a greener and more equitable future,” Portelli added. “They are supporting businesses committed to positive societal impact and in this way, they play a crucial role in fostering social progress and inclusivity. This in turn creates a positive feedback loop for the companies making the right investments, as they can see and measure the impact of enhanced brand reputation and consumer loyalty which can, over time, positively impact their bottom line.
Governance is another essential pillar of ESG investing. Companies that prioritise corporate governance practices typically demonstrate greater transparency, accountability, and risk management. By investing in firms that uphold high governance standards, investors reduce the risk of backing companies engaging in fraud, corruption, or unethical behaviour. This can safeguard their investments and contribute to the overall stability of financial markets.
Furthermore, with the proliferation of ESG offerings, investors can now tap into a wide range of investment options across different sectors and regions, allowing them to build diversified portfolios. Which brings us back to the opening question: in the past, it was generally accepted that sustainable investing meant sacrificing returns. However, ESG equity indices have demonstrated competitive performance, often at par with or even – at times – surpassing traditional ones.
This is undoubtedly why ESG funds are growing faster than the general fund market, and a recent report forecast that they would represent almost a quarter of all assets under management in less than five years. Another survey, conducted in 2022, found millennial and Gen Z investors wanted their investments to influence the environmental practices (85%), social policies (80%) and governance policies (80%) of the companies in which they invest.
Portelli stressed that the collective impact of investors can make a huge difference as the world tries to overcome pressing challenges such as climate change, social inequality, and corporate misconduct: “The role of ESG funds becomes increasingly crucial. By integrating sustainability considerations into investment decisions, investors have the power to drive positive change and foster a more equitable and sustainable future.
“By allocating capital to investment vehicles that uphold ESG principles, investors support the transition to more sustainable living without compromising on their needs for attractive returns on their capital over the long term. Embracing ESG funds can be seen as a win-win scenario, where investors and the planet reap the benefits of responsible investing.”
Approved and issued by APS Bank plc, APS Centre, Tower Street, B’Kara BKR 4012. APS Bank plc is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994 and to carry out Investment Services activities under the Investment Services Act 1994.
APS Funds SICAV plc is managed by ReAPS Asset Management Limited, a subsidiary of APS Bank plc, and licensed to provide investment services in Malta by the Malta Financial Services Authority. APS Funds SICAV p.l.c. is licensed by the MFSA as a collective investment scheme pursuant to the Investment Services Act and the UCITS Directive.