ESG investing
We are passionate believers in doing what is right for our clients, and the world around us. By offering ESG options, we can support you if you have a desire to use your investments to create a more fair and sustainable society.
What is ESG?
Many of us want to make a positive impact on the world that we live in. One way in which you can do that is through decisions about how your money is invested.
ESG stands for Environmental, Social and Governance and it relates to a class of investing that is also sometimes known as ‘sustainable investing.’
There are several different categories of sustainable investing including impact investing, socially responsible investing (SRI), ESG and values-based investing.
Those clients who choose to invest in ESG stocks are giving consideration to the long-term environmental, social and governance impacts of their investments when evaluating potential stocks, as well as positive returns.
E is for environmental
How a company impacts on the Earth, in both positive and negative ways.
- Climate change policies
- Greenhouse gas emissions
- Carbon footprint
- Water usage, conservation, overfishing, and waste disposal
- Usage of renewable energy
- Recycling and safe disposal practices
- Green products, technologies, and infrastructure
- Environmental benefits for employees e.g cycle-to-work programmes
S is for social
People-related aspects such as company culture and how a company treats its employees, customers and suppliers.
- Employee treatment and pay
- Employee safety policies
- Diversity and inclusion
- Ethical supply chain sourcing, such as conflict-free minerals and responsibly sourced food
- Customer service and consumer protection
- Public stance on social justice issues, as well as lobbying efforts
G is for corporate governance
How a company’s management and board relate to different stakeholders and how the business is run
- Executive compensation, bonuses, and perks
- Board diversity and structure
- Conflicts of interest
- Bribery and corruption
- Political lobbying and donations
- Tax strategy
- How well a company communicates with its shareholders
Why ESG?
You may have heard quite a bit about ESG recently. That’s because it’s a class of investments that has been steadily growing in popularity over the past few years.
Research is increasingly showing that actively opting-in to companies with impressive environmental, social and governance credentials can actually reduce portfolio risk and generate competitive investment returns, as well as help you feel good about the stocks you own.
This may be because positive ESG traits are also often indicators that a company has a strong management team with a focus on long-term thinking and a clear vision. Or it may be because as more people become aware of the dangers posed by climate change, environmental destruction, and poor working conditions, so investors have voted with their feet and corporations have felt the pressure.
Since 2004, when ESG first emerged as a separate class of investments, it has come a long way, growing 25% between 2015 and 2017, and now accounting for about one-quarter of all professionally managed investments globally.*
ESG considerations have moved from being a niche investing class, on the sidelines, to being at the forefront of asset managers’ and individual investors’ minds. HSBC’s 2020 Sustainable Financing and Investing Survey* found an overwhelming majority (90%) of issuers and investors saw sustainable finance as ‘important’ or ‘very important’.**
Perhaps even more significantly, in 2019, Larry Fink, the CEO of the largest asset manager in the world, BlackRock, wrote an open letter warning that companies who do not respond to sustainability risk will be on the losing side of a significant reallocation of capital. “We believe that sustainability should be our new standard for investing,” he said, adding that he believes “we are on the edge of a fundamental reshaping of finance.˟
If you wish your portfolio to reflect your vision for the future, talk to us about how we can help you achieve your aims.
Risk warning
Past performance is not a guarantee of future success. The value of your investment and any income derived from it may go down as well as up and you may not get back the original amount invested.