ESG stands for Environmental, Social and Governance criteria which is to ensure that companies are running responsibly.
Our world is rapidly changing and encouraging companies to use responsible practices will help to build a sustainable future for everyone. One way that you can persuade companies to change for the better is to make investment decisions based on company practices.
Some fund managers use ESG considerations to help identify risk and opportunities for companies. Companies that are prioritising sustainability are more likely to survive in the long-term. Some fund managers take the view that long-term sustainability has the potential to produce better long-term returns.
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What is the ESG criteria?
The three key parts of ESG are Environmental, Social and Governance.
Environmental criteria
The environmental criteria is the direct and indirect impact that the companies activities have on the environment. For example, the company’s energy use, waste, pollution and animal treatment. The company must demonstrate how they are managing any environmental risks.
Social criteria
The social criteria includes the impact that a company has on the community and social environment. For example, if the company gives back to the local community or encourages employees to volunteer. Social criteria also looks at whether companies donate any of their profits to charity or if they support other small local businesses who hold similar values.
Governance criteria
The company’s corporate governance includes its codes of conduct, transparency, and the diversity of the Board of Directors. Some investors may want assurances that companies avoid conflict of interest when appointing their board members or want to make sure that the company is not engaging in illegal practices.
How you can invest responsibly
Many people look to invest their assets responsibly and only invest in companies that have ethical ESG principles. By investing this way, to some extent investors can influence how large corporations act. If companies that are not acting sustainably find that they are losing shareholders, then they may consider changing their practices.
It is unlikely that all companies will pass every test in each ESG category, so investors need to decide which category is most important to them and invest accordingly.
At Four Wealth Management, a financial adviser can work with you to determine which investments are aligned to your individual values so you can invest accordingly.
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What St. James’s Place is doing to encourage responsible investing
Investors, most notably the younger generations, have started to take an interest in aligning their money with their values. This has led to many fund managers using the ESG criteria to help make decisions on what companies to invest their funds into.
St. James’s Place is committed to using fund managers who prioritise responsible investing. They have committed to making all of the St. James’s Place investment portfolios net zero by 2050 or sooner.
St. James’s Place has strong governance practices throughout the business. They are a member of the FTSE4Good Index, Business in the Community – the Prince’s Responsible Business Network, the Good Business Charter and the UN Global Contact Network UK.
Book in a no-obligation meeting to discuss investing responsibly
If you are interested in learning more, book in a no-obligation meeting with one of our financial advisers today to discuss which investments are aligned with your goals.
Book online or call us on 0117 973 0500.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
