We believe that investing is fundamentally about understanding and managing uncertainty and risk. In investing, there is a wide number of risks, including economic risks such as interest rates, exchange rates, inflation and the fortunes of individual investee companies, to name a few.
Long term investment returns will also be impacted by broader sustainability factors including the impact of environmental, social and governance issues (ESG), and changes in regulation and political outcomes and technological advancements. It may also include the use of excessive gearing in companies or investment structures as was experienced during the Global Financial Crisis (GFC).
ESG factors are very important because the long term value of investments and the returns from them can rise or fall materially with changes in social attitudes and standards of what is considered acceptable, or changes in the environment, or changes in political structures and policies. Understanding these trends and the impact that these trends might have on particular investments is a fundamental part of investing.