Investing choices are increasingly being connected to our personal values
A common topic in investing these days is ESG or Environmental, Social and Governance. It has long been a part of our process to ask clients about how they define these values as part of their investment strategy and general corporate responsibility, and lately I’m experiencing a higher degree of interest and engagement in these conversations. It brings up memories of when seemingly overnight everything was ‘organic’ at the grocery store: although you see it in a lot of places, it’s hard to be sure what it means or where companies fall on the ESG spectrum until you do a little digging.
First and foremost, it is a good thing that investors are becoming critical of the companies they invest in – their values, principles and how they operate. This analysis leads to discussions of corporate responsibility, and it is changing corporate behaviour. Some people may argue corporate responsibility has gone too far and is stamping out growth, while others insist it hasn’t gone far enough as it contributes to resiliency in the economy, and communities. What’s healthy is that there is discussion happening and action is being taken by companies to lead change.
If clients are interested in investing in ethical companies, I encourage them to further explore which of the ESG letters resonate with them when they are considering an opportunity. You could be most focused on environmental responsibility, personally, or may choose to examine a company’s performance in all three areas: a successful tech giant may align with values of environmental stewardship and effective governance, but if it builds is products in questionable working conditions does it meet your overall expectations?
There are many examples of companies with two sides to them that qualify. For each person, the lens will be different and that’s why a conversation helps to try to quantify what it means to them. Many pensions and endowments have goals to end direct oil and gas ownership in their portfolios, for example, and some of the largest investment managers in the world have now made ESG a very important component in deciding the investment merits in companies. Getting to know where companies stand helps guide our choices.
Like all things in the world, these days change is rapid and investing is no different. The focus on bringing pressure to companies to be more corporately responsible is a good thing. What I see is that change will continue to happen as ultimately, companies will do what customers ask.
I’ll keep asking and so should you.