ESG

Environmental, Social and Governance (ESG)

Considering environmental, social and corporate governance (ESG) issues within the investment process has shifted dramatically over the past decade, from initially being the focus of a relatively limited number of ethical and socially responsible investors to the current widespread integration of ESG criteria into the mainstream investment community.

Across various business sectors, ESG criteria have emerged as ways to help investors understand and assess the long-term resilience and sustainability of investments. There is a growing body of evidence that integrating material ESG criteria into the investment process can help improve long-term returns for asset managers. ESG criteria can be used in a number of different ways, such as screening out the lowest-ranked companies, restricting the investable universe to the highest-ranked companies and using ESG criteria within fundamental financial analysis.

Many jurisdictions require a certain level of ESG reporting and disclosure from companies to provide investors with material ESG-related information. However, there are issues around the lack of standardization and the difficulty of identifying relevant ESG information for each company. Nonetheless, the Global Sustainable Investment Alliance reported that in 2018 more than $30 trillion of assets were managed using ESG criteria.

Research

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