ESG investing is an investment approach. It posits that taking account of relevant and material factors across the environment, society, and governance will improve the investment decision making process. You can also deploy ESG investing to ensure your lifestyle and values are reflected in your investments and even use your investments to help create a better future for people and the planet.
ESG investing is important for two reasons. Firstly, we believe it is essential to take account of relevant and material sustainability factors when investing – it’s your toolkit to better your risk and identify underappreciated sources of growth. Second, our investments reflect who we are, and our investments have real-world consequences. ESG investing is important as it can align our portfolios – and their consequences – with our, and our family’s values.
ESG is about making sure everyone involved with a business is treated well, including employees, regulators, the environment, and local communities. This is thought to help businesses grow faster and find solutions that benefit everyone. ESG investing looks at these important factors that could affect investment value, helping to find good companies. It gives investors more insight to make smarter investment choices and lets them support causes they care about, such as fighting climate change and promoting diversity and ethics in business.
The best tip is to picture what you think the future will look like, or even what you want it to look like. At Brown Shipley as part of the Quintet group, we would be confident that you would agree with us - the dominant technologies and services of the future are going to be sustainable: far less carbon intensive, more flexible and agile business models, with greater diversity and empowerment for employees through technologies such as remote working. The stock and bond markets are a reflection of the real-economy, so consider what the future looks like and invest accordingly.
Another great approach is to imagine you are the CEO of a large company and to think about how you would like it to be run in order to be as profitable as possible. Would you want to have very productive employees? Suppliers who collaborate with your innovations? Great business ideas being generated by your diverse staff? Do your products and services help people find solutions for major problems? Or… is your business beset by regulatory and accounting issues? Are your employees unhealthy and unhappy? And, is your business unwanted by the communities in which it operates? When you consider on a single company basis what would be a great organisation to work for and with, it becomes easy to extend the analysis to your entire portfolio and embrace ESG investing.
Source
(1) Clark, Gordon L. et al, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (March 5, 2015). Available at https://ssrn.com/abstract=2508281 or http://dx.doi.org/10.2139/ssrn.2508281
(2) Versace, Abssy: World Reimagined, How Millennials and Gen Z Are Driving Growth Behind ESG. Available at Nasdaq.com 23-09-2023
