Why understanding externalities is increasingly key for investors

With the focus intensifying on the wider consequences of economic activity, it is increasingly important for investors to understand and price externalities.

Jul 30, 2021

8 minutes

Michael Spinks
Stephanie Niven
With the focus intensifying on the wider consequences of economic activity, it is increasingly important for investors to understand and price externalities.

The fast view

  • With the focus on sustainability intensifying, it is increasingly important for investors to understand companies’ impacts on stakeholders, the natural world and society.
  • We believe there will be superior returns for companies that embrace a more holistic view of success.
  • In this paper, we share the approach used by Ninety One’s Multi-Asset team to evaluate the investment risks and opportunities arising from companies’ externalities.

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General risks
All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Michael Spinks
Portfolio Manager
Stephanie Niven
Portfolio Manager

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All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

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