The Investment Policy Statement
Before constructing a client’s portfolio, an advisor should understand the client’s goals, resources,... Read More
Environmental, social, and governance factors are collectively referred to by the acronym “ESG”. ESG integration is the practice of considering environmental, social, and governance factors in the investment process. The integration can be implemented across all asset classes, including equities, fixed income, and alternative investments. ESG issues can be sub-divided into 3 main groups:
- Environmental issues: climate change, pollution, deforestation.
- Social issues: customer satisfaction, gender and diversity, and labor standards.
- Governance issues: bribery and corruption, executive compensation, lobbying.
Investors may exclude or engage with companies with strict consideration of these issues. Alternatively, investors may ask their asset managers to consider these issues in the investment process. For example, an investor might not want to buy polled-investment vehicles that own oil & gas and/or military equipment stocks.
Returns Associated With ESG Considerations
The effort and costs associated with limiting the investment universe as part of sustainable investment suggest a negative impact on investment returns. However, there are some benchmarks that reflect many commonly excluded companies or sectors.
Academic research has elicited mixed arguments on the impact of ESG factors on portfolio returns.
Sergio Torrico
2021-07-23
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2021-07-17
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2021-07-16
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2021-06-28
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2021-03-24
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2021-03-18
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