Environmental Social and Governance portfolios

The growing investment strategy of Environmental Social and Governance (ESG) offers opportunities to help secure your financial future and contribute to a brighter future.


ESG moves beyond the “negative screening” that is often associated with Socially Responsible Investing (SRI). The SRI approach simply eliminates investing in certain categories such as fossil fuels. ESG is an analysis that rates companies along a spectrum from low to average to high.


Studies have shown the highest rated ESG stocks are less volatile and perform better than stocks that have lower ESG ratings. Additionally, those stocks rated at the lowest end of the spectrum tend to underperform and be more volatile. 1 “ESG expressly operates on the thesis that if you invest consistently and rationally in companies that have higher ranking on ESG factors you
should at least do as well or do better on investment returns.” (Bill Jarvis, Director of Research at Commonfund)


Examples of ESG criteria are corporate carbon footprint, employee health and safety, workforce diversity, business ethics, environmental sustainability goals, community relations, positive human rights records abroad, corporate philanthropy, regulatory compliance, etc.


The United Nations Principles for Responsible Investment was launched in 2006 with various endowments, nations and other institutional investors committing to invest $4 trillion in assets to these principles. By 2014, the assets have risen to $45 trillion committed to these principles!2


Companies are now starting to ask what they can do to achieve a higher ESG rating. This is instilling change within the business community in a very positive direction. It is driven not only by sustainability values but the desire for higher investment performance.

 

1 The Benefits of Socially Responsible Investing: An Active Manager’s Perspective by Indrani De and Michelle Clayman of New Amsterdam Partners July 9, 2014, LLC as published in the Social Science Research Network July 11, 2014)
Principles for Responsible Investment by UNEP Finance Initiative and United Nations Global Compact)