“You can’t outguess the collective wisdom of millions of other investors. Trying to beat the market is outdated thinking”
- Greg Lessard, CFP®, CRPC®
ESG investing is fundamentally about risk.
ESG is information in the form of data and ratings about environmental, social, and corporate governance challenges that may affect an investment decision. It is an input to the investment process. ESG analysis is interpreting that information as part of the investment decision-making process.
ESG investing is sustainable investing.
Companies that perform better with regard to ESG issues can increase shareholder value by, for example, properly managing risks, anticipating regulatory action, or accessing new markets, while at the same time contributing to the sustainable development of the societies in which they operate. Moreover, these issues can have a strong impact on reputation and brands, an increasingly important part of company value.
Performance matters.
A recent meta-study from NYU covering over 1,000 individual studies released between 2015 - 2020 concluded with the following 6 takeaways.
Improved financial performance from ESG factors becomes more noticeable over longer time periods.
ESG investing performs better than negative screening associated with traditional Socially Responsible Investing.
ESG investing appears to provide downside protection during times of economic crisis.
Corporate sustainability initiatives drive better performance as a result of risk management and increased innovation.
Managing for a low-carbon future results in improved performance.
ESG disclosure on its own doesn’t drive improved performance.
