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Thinking about environmental, social and governance criteria when investing

What are your thoughts about environmental, social and governance (ESG) criteria when making decisions about your investments?

Given the unprecedented challenges of the Covid era, climate change, human rights and more, taking ESG into account when investing is now more timely than ever.

What is ESG?

ESG falls under the banner of sustainability and in alignment with financial factors, considers a range of criteria for investing such as:

  • Climate change, greenhouse gas emissions, recycling practices, water usage, usage of renewable energy, raw material sourcing (Environmental)
  • Employee health and safety, fair wages, employee training and development, ethical supply chain sourcing, community relations, privacy and data security (Social) and
  • Board diversity, executive pay, business ethics, transparency, political contributions, company’s leadership, executive pay, audits, internal controls, and shareholder rights (Governance).

Why is ESG becoming more popular?

ESG investing is gaining pace for a number of reasons.

Earlier this year, Moodys credit rating agency stated that ESG criteria would increase in influencing its assessment of issuer credit quality.

The world’s largest asset manager BlackRock, also announced earlier this year that its investment strategy would move towards climate change challenges.

A number of financial products now also offer incentives such as tree planting every time an investment is made in an environmentally and socially responsible investment bond for a specified amount.

Given that the CO2 emissions of the average person over their lifetime can be offset in full by planting 5,000 trees, this is an appealing incentive for those particularly concerned with the impact of climate change.

Influences on investors’ decision making

Investors are also changing the way they think about their investments.

Challenges for data privacy, biodiversity and warnings of a world food crisis are beginning to affect investors’ decision making, while younger investors are more likely to think about the triple bottom line (profit, people and the planet).

The availability of data about ESG is also supporting greater informed decision-making among investors.

Is ESG criteria important to you?

Have you thought about a strategy for your own investment portfolio?

There are plenty of ESG investment options to consider based on what is important to you.

Why not call our team to find out more about ESG investments, how they work and what your preferences are.

We can help you find the right investment strategy to meet your needs. Call us today on 091 670 123.