“Real success can only come if there is a change in our societies and in our economics and in our politics.” – Sir David Attenborough
The abbreviation of ESG stands for Environmental, Social, and corporate Governance concerns, which encapsulates the idea that investing should not only follow growth ambitions, but also follow the social conscience of the investor and support the broader world community.
To investors, the question of whether ESG weighs in on returns is understandable. The myth that investors who include sustainability considerations in their portfolios face a financial trade-off has been dispelled, as these investments typically perform well in volatile markets, reinforcing the value of sustainable investing. Moreover, market growth in 2020 favoured ESG weighted portfolios.
Let’s contextualize the components of ESG…
Environmental: The threat of climate change and the depletion of resources has grown, so investors may choose to factor sustainability issues into their investment choices. This would include screening investments in terms of their impact on climate change (e.g. fossil fuels), and sustainability around the depletion of resources, and the future of industries dependent upon diminishing raw materials.
Social: Includes factors such as: diversity and inclusion in a company’s recruitment and people management policies; human rights considerations, such as the business impact on local communities, and the health and welfare of employees; a thorough examination of a company’s supply chain; consumer protection; animal welfare issues, such as animal testing, and the welfare of animals bred for the food market; and the increasing abhorrence of corruption in business and governments.
Corporate Governance: This covers the rights and responsibilities of the management of a company, its board, shareholders, and the various stakeholders in that company, as well as improving employee relations and equitable remuneration for all participants.
CI, our parent organization, has the following statement regarding their commitment to sustainable investing:
“As a signatory to the United Nations-supported Principles for Responsible Investment (UNPRI), CI Global Asset Management believes that responsible investing plays a role in achieving the best possible risk-adjusted returns for our funds.”
Conscientious activism by investors, advisors and portfolio managers has grown into an unstoppable momentum of mass capital which will hold corporate practices responsible and boost the organizations that bide by ethical principles. We are proud to be part of this cause and believe in the investment merits of these decisions.
To learn more about ESG and to see how it is, or could be, integrated into your portfolio, contact us.