Responsible Equity Investing – can it pay to play nice?
Nick Henderson explores the growing demand for financial decisions to reflect ESG considerations.
Equity investing may remain in vogue for some time yet – but how the industry invests is changing. There is growing demand for financial decisions to reflect environmental, social and governance (ESG) considerations. Traditionally a trend driven by personal values, there is now increasing momentum from a regulatory perspective. Last year, the EU regulator introduced mandatory disclosure by asset managers and advisers of their sustainability policies. Asset managers are implementing investment policies and products that include appropriately disclosed ESG criteria, often linking these to the UN Sustainable Development Goals (SDGs) – 17 global goals designed as a blueprint for a more sustainable world by 2030.
Another driver of increased demand is the growing consideration that aligning investment decisions with ESG issues doesn’t necessarily mean compromising on performance; in fact, it can mean quite the opposite. Don’t just take our word for it – a review of over 200 academic papers found that 88% showed a link from good ESG practices to good business performance.
The value of investments and any income derived from them can go down and investors may not get back the original amount invested.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.
Screening out sectors or companies may result in less diversification and hence more volatility in investment values.