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ESG
Investing
Environmental, Social & Governance (ESG) information describes how responsibly a business is managed by showing how its operations affect its most material stakeholders, such as its customers and employees or the environment. ESG data is now widely integrated by investment managers because it helps them understand material risks and opportunities that are associated with companies but which cannot be deduced from financial data alone.
ESG information can also be used as a tool to invest more sustainably. One company’s ESG data can be compared against its peers and scoring systems can be constructed that rank companies from the most responsible (‘ESG leaders’) to the least responsible (‘ESG laggards’). Portfolio managers can use ESG data to construct more sustainable portfolios, for example by focusing on ESG leaders. ESG investing can create a variety of portfolios depending on the investment manager’s objectives and how ESG information is used in their decision-making process.
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