February 2, 2018

Sustainable no disadvantage - but Swiss stocks are

Stocks of companies that do good are surely less profitable. That’s what many people think and what leads them to conclude that sustainable stocks bring lower returns.

However: The opposite is true. The reason is simple.

Stocks are constantly evaluated by countless market participants. The fact that a company is behaving responsibly therefore becomes part of the constant evaluation process. If it’s actually true that "doing good" creates higher costs, then these costs will be taken into account in the stock price.

In other words, the stock will be cheaper and will therefore have the same potential returns as all other stocks. If that wasn’t the case, then the behavior of the all the many market participants would be irrational, because they would allow a group of stocks to have a different return outlook than the remaining stocks.

This is unlikely, because a smart investor would take advantage of the differences in returns. The expected returns are therefore balanced, because we can assume that there are many such investors who would use different returns to their advantage.

On the other hand, many of the things that companies can do well, also make sense in the long run. For instance the promotion of families by supporting mothers and fathers or the reduction of CO2 output from the operation.

For this reason, sustainable stocks often even have higher returns than stocks that forget about such considerations. We were even able to prove this.

The Swiss stock list of companies with reasonable remuneration policies shows that most of these companies are very expensive. That's understandable, because money has been flowing into the Swiss stock markets for a long time, and that unfortunately leads to very high valuations

Sustainable investing is sustainable, but this is currently not the case with investments in Switzerland. That’s why I will not buy any shares this week.

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