From energy and climate to diversity, health, and human rights, the world continues to face challenges that are only intensifying. We recognise the critical importance of ESG considerations to many investors. We also acknowledge that ESG issues can present both opportunities and threats to long-term investment performance, which is why we are committed to responsible and sustainable investing.
ESG – Environmental criteria examine how a business contributes to and performs on environmental challenges (e.g. waste, pollution, greenhouse gas emissions, deforestation, and climate change). Social criteria look at how the company treats people (e.g. human capital management, diversity and equal opportunities, work conditions, health & safety, and product misselling), while Governance criteria examine how a company is governed (e.g. executive remuneration, tax practices and strategy, corruption and bribery, and board diversity and structure).
There are many ways to incorporate ESG into investment decisions, but it is complex and no one way to apply ESG approach. The main application for our investment decisions tends to be ethical-based or moral investing and to screen out controversial ‘sin’ sectors. Such negative screening is very straightforward to implement and has historically been used by early adopters of sustainability principles.
At the heart of responsible investing is the simple idea, that companies are more likely to succeed and deliver strong returns if they create value for all their stakeholders – employees, customers, suppliers and wider society including the environment – and not just the company owners. In addition to social value, avoiding companies operating in a risky or unethical manner can help us to avoid blow-ups as these companies could be held accountable for their consequences. Responsible investing is about doing good and giving back to society. We want to align our investment strategies with our values and ethics to invest in options that deliver healthier economy, society and environment for both current and future generations.