If you’re someone who wants to make a positive difference, you might be interested to know how you, your money and the things you care about could all benefit from Environmental, Social and Governance (ESG) investing.
ESG investing was already on track to reshape the investment landscape in this new decade, and the COVID-19 outbreak is likely to quicken the pace of this reshaping. We’re seeing our world change faster than ever before, as economic, geo-political and environmental challenges abound.
Good for the planet, good for business
A growing body of evidence points to a relationship between sustainability initiatives and strong business results. A study from the University of Oxford showed that companies with better sustainability practices tended to have better operational performance and often superior stock price performance relative to companies rated lower for ESG.
Please note that ESG investment strategies, like any other form of investing, still come with risk. This means there’s a chance you may get back less than you put in. Any sustainable investment should be seen as a medium-to-long-term commitment, meaning you should be prepared to invest for at least five years.
Three pillars of ESG investing
The three pillars of ESG cover a wide range of issues.
This pillar looks at the extent to which a company is taking a ‘green’ approach. The number of potential criteria within the environmental factor is vast. It might, for instance, involve analysing:
- how dependent a business is on fossil fuels
- how much waste it is producing
- carbon emissions
- water usage
- packaging waste
- sustainable building
- land usage
- energy efficiency
This examines how the company manages its relationships with people including employees, suppliers, customers and local communities. It might include:
- employee diversity or inclusiveness policies
- how it treats its staff
- the ethics of their suppliers
- treating customers fairly
An ESG investor may also look at whether a company helps people it doesn’t necessarily buy from, sell to or employ.
A business that is run properly is more likely to succeed over the long term than one that isn’t. This might include:
- whether it uses open and transparent accounting practices
- if shareholders can vote on important decisions.
- how much it pays its board, including bonuses
- board diversity
- how much it spends on developing new products and services
- business ethics
Want to invest responsibly and sustainably?
You are not alone. Increasingly, investors of all ages are making investment decisions after measuring the sustainability and societal impact of a sector or company. Whether there are specific causes that you want to put your wealth to work for, or if you believe that companies that are run well will do well, we can help you find the approach that works best for you. For more information or to discuss your investment goals, please contact us here at Panthera Wealth.