Uncovering new paths to growth

Political fragmentation is deepening worldwide, with volatility likely to escalate over the course of 2025 and beyond. In this shifting landscape, responsible investing (RI) is more crucial than ever, requiring adaptability to navigate ongoing changes.

Over the coming decades, multiple political cycles will introduce both opportunities and challenges. However, the key takeaway for the sector remains clear: given the long-term nature of responsible investing activities, they must be structured to thrive in any political environment.

Tim Prescott, Senior Vice President, Head of Asset Management at NEI Investments sees beyond the short-term noise and focuses on what really matters. “The question isn’t whether responsible investing is good or bad - that ship sailed long ago,” Prescott explains. “The real challenge is separating short-term political rhetoric from long-term business fundamentals.”

Beyond the extremes: A pragmatic approach to RI

The debate around responsible investing has intensified, with extreme viewpoints emerging on both sides. The new U.S. administration’s agenda, global economic pressures, and shifting public sentiment have turned responsible investing into a battleground. Some see it as essential to future-proofing investments, while others dismiss it as a political distraction.

But the reality is more nuanced. Prescott emphasizes that most investors and advisors sit somewhere in the middle. “The bulk of the population is actually taking a pragmatic approach to responsible investing,” he says. “They’re not looking to be swayed by ideological extremes. They just want to make sound investment decisions that account for the world we live in.”

Responsible investing is a framework for understanding how companies create value in a rapidly changing world. The key question is how asset managers and investors can recognize and capitalize on long-term, sustainable value.

Prescott describes the current state of responsible investing, pointing out: “RI is now at a crossroads. It remains a widely accepted strategy among asset managers, but it’s now caught between bold, often needlessly politicized headlines and the need to justify the business case for its foundational values.

“Companies are still developing sustainability plans. They’re still improving governance and diversity. Whether the headlines want to focus on it or not, these things are already happening,” says Prescott. “It’s not about grandstanding - it’s about recognizing business resilience and opportunity.”

RI as a business imperative, not a checkbox

For years, NEI has been integrating responsible investing principles not as a marketing strategy, but as a core component of investment analysis. That hasn’t changed. What has changed is the recognition that companies with strong ESG fundamentals are not outliers - they’re becoming the norm. The question is: which companies are executing these strategies in a way that drives long-term success?”

A key component of NEI’s approach is going beyond surface-level metrics to uncover deeper investment potential. Prescott highlights the Global Corporate Leaders Fund as an example.

“This first-to-market fund integrates socioeconomic trends and emphasizes corporate culture to identify untapped opportunities,” he says. “To get this level of understanding requires investigation well beyond financial statements. We look at how a company operates, how it manages change, and how its culture drives performance.”

Growing, diverse opportunities from long-term secular trends

^{[1] Individuals >65 years old.}

^{[2] Wolfgang Fengler, “The silver economy is coming of age: A look at the growing spending power of seniors,” Brookings, 14 January 2021.}

^{[3] Ansah JP, Chiu CT. Projecting the chronic disease burden among the adult population in the United States using a multi-state population model. Front Public Health. 2023 Jan.}

^{[4] Barclays Private Bank, "See beyond: thematic investing, August 2020."}

^{[5] “2022 Mobile Industry Impact Report: Sustainable Development Goals,” GSMA, 2022 September.}

^{[6] Hannah Ritchie and Max Roser, "Urbanization", 2018. Published online at OurWorldInData.org.}

^{[7] The Future of Jobs Report 2023, World Economic Forum, April 2023.}

This isn’t about passive investing. It’s about making tangible calls and creating a system for action-oriented outcomes that balance principles and performance. Prescott details that NEI seeks to bridge the gap between intangible values and concrete results, drawing on examples like their Environmental Leaders Fund to illustrate the incremental progress that delivers meaningful returns. “We’ve transitioned from being overly weighted on values to finding a natural middle ground, where action doesn’t detract from the outcome but strengthens it,” Prescott adds.

Recent corporate failures have underscored the financial impact of poor governance. Billion-dollar regulatory fines, environmental mismanagement, and reputational damage aren’t abstract risks -they have real financial consequences.

“Strong governance isn’t an ‘ESG issue,’” Prescott adds. “It’s a financial imperative. Companies that ignore governance risk falling behind, and investors who ignore governance risk missing major red flags.”

The power of incremental progress

One of the greatest misconceptions about responsible investing is the expectation of perfection. Critics of ESG investing often claim that if a company isn’t perfectly sustainable, it isn’t worth considering. But investing has never been about perfection, it’s about progress.

Incremental changes, when applied consistently over time, create lasting value. Whether it’s improving supply chain transparency, increasing board diversity, or reducing carbon footprints, small shifts compound into significant advantages.

This is where NEI’s approach stands out. Rather than chasing trends or reacting to headlines, the firm focuses on uncovering unseen opportunities - those fundamental, often overlooked elements that drive long-term performance.

“It doesn’t have to be perfect to be valuable,” says Prescott. “People expect ESG to be an all-or-nothing approach, but that’s not how business works. It’s about making small, meaningful changes that build over time.”

Prescott elaborates that while incremental change might seem small, over time, it leads to significant transformation. By focusing on systems thinking, where inefficiencies in markets are turned into opportunities, NEI’s team make models progressively better.

Prescott also notes, “However, firms must leave room for bold innovation and creativity. While incremental progress builds the foundation, moments of nimbleness and agility help recognize unseen opportunities.”

Another key differentiator in NEI’s strategy is its ability to leverage global expertise. The firm doesn’t rely solely on its own internal analysis; it taps into a network of global sub-advisors, gaining insights from a range of perspectives.

This collaborative approach allows NEI to identify best practices from asset managers across different markets and industries. By learning from a diverse set of players, the firm continuously refines its investment models, ensuring that it stays ahead of emerging trends rather than simply reacting to them.

“We get to see the best and worst of global asset managers,” Prescott explains. “We learn from their successes and their failures. That’s an advantage few firms have.”

Looking ahead: The future of RI

Responsible investing isn’t a niche concept anymore. Much like technology, which once was a distinct sector but is now embedded in every aspect of business, responsible investing is becoming a fundamental part of investment analysis.

Just a few years ago, the term “responsible AI” barely existed. Today, it’s a central focus for tech firms, regulators, and investors alike. As Prescott emphasizes, “Our job is to uncover the best opportunities in this space before the market catches up.”

This isn’t about choosing between performance or purpose. It’s about recognizing that the two are inextricably linked. Responsible investing isn’t an “either-or” proposition—it’s a “both-and” opportunity.