What is Environmental, Social & Governance (ESG) investing?

We are hearing a lot about ESG investing lately.

That is investing while looking at Environmental Social and Governance factors.

Also known as SRI or Socially Responsible Investing and Impact Investing also falls under this area.

So what is this all about?

Certainly, an emerging preference over the last few years has been the desire by some investors to align their investment values with their personal values on issues, such as corporate governance,(behaviour) climate change (e.g. carbon emissions) or human rights (e.g. forced labour). This shift may be due in part to our increasing awareness that what we invest in cannot only affect ourselves, but also the wider community, with both positive and negative outcomes.

An example may be an investor’s aversion towards specific industries, sectors, companies, countries or regions linked to things, such as mining, armaments, gambling, tobacco, alcohol or forced labour. In broad terms, this can be categorised as investing with Environmental, Social and Governance (ESG) considerations in mind.

  • Environmental
    • Climate change, such as carbon emissions, energy efficiency and carbon footprint.
    • Natural resources, such as water stress, biodiversity, land use, raw material sourcing.
    • Pollution and waste, such as toxic emissions and waste, packaging material and waste.
    • Environmental opportunities, such as renewable energy, green building and clean tech.
  • Social
    • Human capital, such as labour management and development, health and safety,
    • Product liability, such as product safety and quality, privacy and data security, and health and demographic risk.
  • Governance
    • Corporate governance, such as board, pay, ownership and accounting.
    • Corporate behaviour, such as business ethics, anti-competitive practices, corruption and instability, and financial system instability.

Moving forward

As you can see if you read a report from the Responsible Investment Association of Australasia, ESG investing is starting to become quite prevalent. To a large extent, it’s a movement that is being influenced by the desire for some investors to align their investment values with their personal values.

These people are also demanding change not only from actual corporates where one now sees various class actions after the Banking Royal Commission. Now there are also a number of actions being taken against industry funds to have them act in a more socially responsible manner when investing members funds.

Overseas socially responsible investing has really taken on and major pension funds and investment funds take this very seriously.

Australia now has nearly $3 trillion invested in superannuation. Do the members of those funds know how it is actually invested? Whether it aligns with their personal values?

It is time members found out more about how their life time savings are invested.

Want to know more about ESG Investing and how to align your personal values with your investments and superannuation.?

Come in and have a chat. All you need to do is call or visit us and spend some time with us. A coffee a tea and a chat are free.

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email