There is increasing awareness that material environmental, social and governance (ESG) factors can be tied to a company’s long-term performance. As such, more and more investors are looking to integrate sustainability insights and data into their traditional investment processes. By expanding access to data, insights and learning on material ESG risks and opportunities in investment processes across the board, we can become better overall investors.
What is ESG?
Environmental, social and governance (ESG) investing focuses on companies that are addressing at least one of the key dimensions of sustainable investing. This captures the idea that investments should be made into companies with sustainable business practices capable of being continued indefinitely, without causing harm to current or future generations, or exhausting natural resources, and on the expectation that they have higher investment potential over the long term.
ESG data is most often categorised as “non-accounting” information because it captures components important for valuations that are not traditionally reported. The valuation of companies has become more complex, with a growing portion tied up in intangible assets. ESG metrics provide insights into these intangibles, such as brand value and reputation, by measuring decisions taken by company management that affect operational efficiency and future strategic directions.
Integrating ESG into Investment Advice
We understand the importance of investing in sustainable businesses to achieve optimum long-term growth. We also understand how employing efficient ESG screening criteria can help us identify sustainable business for investment.
Whilst the list of ESG considerations is extensive we have identified the key factors below we believe investors should consider for each component:
Conservation of the natural world
Climate change and carbon emissions
Air and water pollution
Consideration of people & relationships
Data protection and privacy
Gender and diversity
Standards for running a company
Audit committee structure
Bribery and corruption
ESG Incorporation at AHR
Our activities to incorporate ESG considerations into our investment approach is a clear reflection of the diversity of clients we serve and the importance we place on sustainable, long term growth. For our ESG portfolios we combine our core investment strategy and approach with a hard line ESG assessment of underlying investments prior to inclusion. By combining these two key focuses we are able to help clients achieve their long term investment objectives without compromising their beliefs and values.
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