ESG stands for Environmental Social and Governance
ESG investing aims at combining sustainability with investment performance. ESG is gaining significant influence with institutional investors (for instance the Japanese Pension Funds) and wealthiest individuals.
Although often associated with Green bonds (bonds issued by supranational agencies to finance development projects) ESG now embodies instruments across all asset classes.
What does ESG embody?
Let’s look at the three letter:
- Environment: green investing, sustainable development, renewable energies, water preservation
- Social: gender equality, education, silver economy (investment linked to seniors)
- Governance: CEO and management team expertise, efficient shareholding structures
Who defines ESG criteria?
Many think-tanks and associations, along with investment professionals are actively working to define and update ESG criteria. This also means that several bodies can deliver the “ESG certification”. RobecaSAM, an investment specialist, proposes comprehensive material on ESG selections, see here.
Who uses ESG criteria?
ESG is primarily used by Pension Funds and Asset Managers. It is increasingly important for Family Offices and Wealth Managers.
How you can incorporate ESG in your own investment portfolio?
ESG can be a strong backbone for a long term portfolio if investors consider that sustainability as a major risk.
Update on ESG from UBS after Davis 2018 summit here