ESG Investing  

What clients need to know about ESG investing

  • Explain the key terms around ESG investing
  • Identify the key reasons for investing responsibly
  • Identify the organisations and initiatives looking to drive change

The SDGs can be used as a scorecard to map intangible, non-monetary benefits of an investment.

Principles for Responsible Investment (PRIs)

The investment principles, which are voluntary and aspirational, look to incorporate wider ESG values into everyday investment practises.

Signatories ultimately contribute to developing a more sustainable financial system.

The six Principles for Responsible Investment (PRIs) are set out below: 

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry

Principle 5: We will work together to enhance our effectiveness in implementing the Principles

Principle 6: We will each report on our activities and progress towards implementing the Principles

The Paris Agreement and United Nations Framework Convention on Climate

Change (UNFCCC)

In 2016, 196 world leaders signed the Paris climate agreement, a pact that committed all signatories to action on climate change for forthcoming decades.

This significant geo-political pact set the wheels in motion for decarbonisation targets and, as a result, a transition to clean energy.

In November, Glasgow is due to host the 2020 UN Climate Change Conference (COP26); a summit bringing together hundreds of world leaders and thousands of delegates to agree action on climate change.

In a year where fossil fuel usage has been reduced significantly - a serendipitous side-effect of the Coronavirus pandemic - it will be fascinating to measure the decarbonisation impact and understand how the world has changed and whether these changes create investable opportunity.

Financial Stability Board Task Force in Climate-related Financial Disclosures (TCFD)

The Task Force on Climate Related Financial Disclosure (TCFD), chaired by Michael Bloomberg, has launched an e-learning platform designed to help corporates mitigate the effect of their business on climate change. 

Effectiveness of these initiatives

These goals, initiatives and principles assist potential stakeholders by highlighting their importance and by galvanising collaboration between likeminded people.

They also lay the foundations for remedial action to drive positive long-lasting change and broader collaboration with peers, thereby redefining the benchmark for success.

The broader ESG Market

Despite common belief, the ESG market has a much broader appeal then purely financial.

The proliferation of ESG standards, woven into the corporate fabric, resonates with the values of both employees and consumers.

A combination of public awareness, regulation and the imminent generational transfer of wealth are factors explaining the increase in demand.