American economist Jeffrey Sachs has urged investors to add socially responsible firms to their portfolios in 2015, as consumers become more aware of companies’ social and environmental credentials.
Speaking at Skagen Funds’ annual conference, Sachs said investors should not just look at the financials of a company before making an investment decision.
“We invite financial loss by not being insightful and rigorous,” he said.
“Finance can build great industry, but it has been isolated from the real economy. Financial instruments are obviously important, but investors have a chance to invest in essential sustainable infrastructure that is financially and socially sound.”
As people become more conscious of environmental costs, added Sachs, they will be wary of investing in projects with negative environmental consequences.
“For companies, questions about their long-term plans as demand for oil declines are becoming unavoidable.”
He also forecast global economic growth of 3%-4% this year, but said this does not mean the global economy is on an upward path over the long term.
Sachs, who also serves as director of the Earth Institute at Columbia University, said his model of “true value investing” is financially as well as socially responsible.
Sachs urged investors to take the lead on responsible investment. In an era of building sustainable infrastructure, he said, finance will be deeply important. Highlighting the role of financiers like J.P Morgan in establishing American railroads and electricity, he said investors have the opportunity to take a leading role in global sustainability.
“Market signaling is profoundly flawed. Capitalism is not considerate. We need to think about where our priorities lie.”
Source: Investment Week