ESG is a critical part of sustainable investing

Investors are increasingly concerned about how their wealth can have a positive social impact and contribute to global sustainability, as opposed to focusing only on maximising returns. This has led to an emphasis on sustainable investing, which includes ESG investing.

The demand for sustainable investing is on the rise

The next generation of investors are leading a shift in the wealth-management industry: a focus on earning the highest returns possible is being replaced with an awareness and concern about social responsibility. Against a backdrop of increasing inequality, climate change, resource constraints and disease management globally, investors are demanding that their wealth is used in a way that supports bringing about much-needed change and contributes to a more sustainable world. This means wealth managers and private banks are required to rethink their value proposition – simply protecting and growing wealth is no longer enough.

The 17 United Nations Sustainable Development Goals (UNSDGs) are the foundation of sustainable investing.

The UNSDGs are 17 global goals that form part of the 2030 Agenda for Sustainable Development, which was adopted by all UN member states in 2015. The agenda provides a blueprint for ‘peace and prosperity for people and the planet, now and into the future’, to ultimately create a more sustainable world.

The UNSDGs require nations around the world to partner with one another to work towards these goals, and it recognises that the various global issues are all interlinked and must be solved together. These goals form the backbone of sustainable investment strategies across the globe.

There are mainly 3 approaches to sustainable investing:

1. Socially responsible investing (SRI).
2. Impact investing.
3.  ESG investing.

While these are often used interchangeably, there are important differences between them, and these approaches involve different investment strategies.

SRI involves actively choosing or removing investments based on specific ethical guidelines, for example choosing not to invest in companies that manufacture tobacco products or mine coal. Impact investing aims to help a business or organisation complete a project or develop a programme that will benefit society by allocating capital to specific projects. An example is a construction project that will provide low-cost housing.

ESG investing is built on the principle that companies that create value for all stakeholders will deliver strong returns.

ESG looks at the company's environmental, social and governance practices alongside more traditional financial measures, and considers these practices in relation to the valuation of the business. At the heart of ESG investing is the idea that companies are more likely to succeed and deliver sustainable, strong returns if they create value for all their stakeholders (employees, customers, suppliers and wider society, including the environment) and not only for their shareholders. In fact, work by established academics has shown that information on ESG issues is vital in assessing corporate risks, strategies and operational performance.

We consider ESG factors to grow wealth sustainably for our clients over the long term

We are long-term orientated, valuation-based investors. This means our key objective is to deliver superior risk-adjusted returns for our clients that are in line with our mandates. Incorporating pertinent ESG factors into our company valuation process and long-term view helps us to achieve this.

If you’re not a client yet and want to find out more about investing with us, we would love to hear from you. You can contact us on 0800 111 263 or complete an online contact form.