When your horizon is 500 years, sustainability becomes basic risk management

Nothing in the world of investment yet matches the glamour of Paris Fashion Week or the Met Gala. But financial markets follow trends too. Narratives emerge, take hold and then fade as new ideas compete for attention. ESG is an obvious case in point. As governments and regulators have changed course, numerous investors have rowed back commitments and redirected their energies. From 2024 to mid-2025, for example, over 640 European funds stripped or swapped ESG-related terms from their names. Some doubtless did so to avoid regulatory scrutiny over greenwashing; but for many the change was a pragmatic response to shifting political sands.

It can feel as though sustainability has become yesterday’s news. Scratch beneath the surface, however, and the underlying principles remain as relevant as ever. Labels like ESG may come and go, but for most successful investors, the goal remains unchanged: to generate long-term returns. And to do this, smart investors will continue to embrace the ideas that underpin sustainability – whatever they choose to say in public.

This long-term perspective is central to the approach of the investment team at Trinity College, Cambridge. In some respects, the Trinity environment is unusual: the team manages an endowment that was established nearly five centuries ago, and is tasked with supporting the College’s enduring charitable mission – the advancement of education, learning, religion, and research – in perpetuity.

Nevertheless, much of the endowment’s approach can be applied elsewhere. Fundamentally, concentrating more on long-term structural shifts and less on short-term noise sharpens the team’s focus on risk identification, resilience planning and active stewardship – disciplines that both enhance returns and sit at the heart of sustainability.

Sustainability is about resilience and risk, not ideology

A genuinely long-term perspective forces more meaningful questions about resource constraints, vulnerability to climate, regulatory or societal change and the sustainability of return drivers. For example, we can argue whether a business will outperform its peers in the short term by emitting far more greenhouse gases and treating its workers much worse.

But the more important – and easily answered – question is this: is such a business really likely to outperform in the longer term? For companies and citizens, and therefore for investors, the evidence keeps piling up.

Climate change is no longer a theoretical concern; it is already affecting balance sheets through physical damage, supply-chain disruption and rising insurance costs. When homes become uninsurable or infrastructure fails, debates about labels quickly become secondary. Against this backdrop, whether or how one subscribes to “sustainable investing” feels increasingly irrelevant. For investors, the question becomes: how to respond.

A 500-year perspective forces better decisions

When managing the endowment, we do so in a wide variety of ways. Being embedded within a leading academic institution reinforces a thoughtful, evidence-based approach – and since long before sustainability became a label, we have incorporated the underlying ideas into our investment thinking. One obvious manifestation of this today is that we apply industry-standard ESG screening to all of our investments.

We have also fully divested from fossil fuel investments in our public equities holdings. As it happens, this can pay impressive dividends even in the short term. For instance, Morgan Stanley recently found that in the first half of 2025, sustainable funds returned 330 basis points more than traditional funds.

But even if such eye-catching outperformance may prove unusual, over the long term, the compounding effect of even small differences will significantly improve returns.

The endowment also invests in climate-focused venture funds, supporting among many other things, renewable energy, recycling technologies and tools that measure biodiversity, proactively mitigating environmental risk and safeguarding the portfolio.

Our influence extends beyond portfolio construction too. When we engage with the asset managers who invest on our behalf, we can and do set expectations about how they should use their voices and vote their shares. Closer to home, we are investing heavily in reducing and ultimately eliminating carbon emissions from our property portfolio; building nature reserves and improving biodiversity on our land.

We also contribute to communities and discourse. This is essential: progress cannot come from any single institution acting alone. So the college, as it always has, serves as a hub where lively minds convene and create brilliant ideas. The endowment enables this and plays a more active role too. For instance, in 1970 we established what is generally regarded as the first science park in the UK. Ever since, we have worked hard to foster a community of businesses that can translate cutting-edge ideas into real-world impact, and support each other as they do so.

Since its foundation in 1546, the college has had to adapt to profound economic, technological and environmental changes, often contributing solutions to these challenges, which it continues to do today. We know that long-term capital shapes real-world outcomes. It follows, then, that asset managers and owners with extended horizons not only can use their influence, but have a responsibility to do so.

From a centuries-long perspective then, the answer is clear. Call it what you want. Sustainability is not a trend; it is the foundation upon which future success rests.