Environmental, Social and Governance (ESG) Investing

What is ESG, or ethical, Investing?

Like many financial ideas, investing ‘ethically’can quickly become overly complicated by industry language. It is not always well understood – investors may want their money to do good, or at least do no harm, but it is not always clear how to get started. When we talk about ethical investing, what we really mean is putting your money into investments that are responsible and sustainable. Ethical investing originally meant using ‘sin screens’ to weed out potential investments in industries clients wanted to avoid. This is what is known as ‘negative screening’, preventing investment in industries such as alcohol, tobacco, gambling or armaments and enabling funds to be selected which exclude industries investors would prefer to stay clear of. Today, however, there are ways to invest positively and proactively.

ENVIRONMENTAL FACTORS

How does an organisation approach climate change, energy and water usage, resource management, waste disposal, the ecological impact of their products and their carbon footprint?

SOCIAL FACTORS

Is a company attuned to social diversity, human rights, consumer protection, and does it work to promote a healthier and higher quality of life for staff and stakeholders? Does the business behave in a responsible way and expect the same of their suppliers?

GOVERNANCE FACTORS

How does a company build and review its management structure? How does it approach employee and investor relations?
Are there sufficient levels of transparency, honesty and integrity at board level, and is this ethos shared across the company?

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