Sustainable Investing is an approach that incorporates environmental, social and governance (ESG) factors in the investment process. This in today’s investing community has become front and centre. Never before has there been such a push towards such important drivers of change in the world.
Environmental focuses on factors that consider how a company performs as a steward of the natural environment. Things like climate change, water pollution and energy efficiency to name a few.
Social examines how a company manages relationships with its employees, suppliers, and customers along with the communities in which it operates. Working conditions, product safety and quality along with employee relations and diversity are important factors here.
Governance considers the quality and reasonableness of a company’s leadership. Other factors like executive pay, audits along with shareholder rights fall under this category. Corruption, business ethics and board diversity just to name a few.
The power in ESG is that companies have found ways to conduct with these factors without compromising their abilities to perform. In turn, this has trickled through and been embraced by portfolios managers when selecting stocks that ultimately end up in their portfolios. A new pioneering mantra if you will. I have been asked by a couple of clients about ESG in the last little while and thus this blog was born. Rest assured the world can be a better place with ESG.
Take good care of yourselves and each other. Here’s to a kinder 2021.