The truth about ESG and sustainable investment

Simply put, attacks on ESG are anti-free market and anti-free speech. All investors want free investment choice and to ensure that choice isn’t limited by politically motivated policies.

It is the responsibility of corporations to meet minimum standards on workplace safety and to mitigate damage to our shared world. Many consumers and investors would be willing to pay a premium for goods that are produced in an ethical way.

For example, some consumers prefer to purchase from companies that ensure equity in the workplace, demonstrate transparency and good governance, sell products that are produced without polluting our environment or putting our future at risk.

Consumers and investors alike hold everyone to account and integrate good business practices. These good practices will continue to evolve as our knowledge and understanding grows about what makes good resilient companies. The good news is that companies that have robust ESG policies create shareholder value, have lower cost of capital and generate better returns for investors over the long haul. 

In fact, climate change is one of the greatest risks the farming community faces – the recent droughts, fires and floods in the US have bankrupted farmers and driven prices up on supermarket shelves. Farmers are adopting soil management and other practices to help build in crop resilience and soil heath. This reduces risk and enhances long term outcomes for the farmer, the consumer and ensures global food security.

However, every investor has the freedom to identify what information is important to them and invest according to their own investment philosophies and fund strategies..

For example, when it comes to ‘values-based investing’, there are myriad funds that reflect various religious values such as Christian, Muslim, Jewish and other faith traditions. These funds mindfully invest according to the tenants of each faith.

There are also a range of funds that focus on specific themes of gender, water stewardship, antidiscrimination or zero carbon. Equally there are funds that screen for tobacco, weapons, alcohol, abortion or pornography.

The truth is sustainable investors, or simply investors, come in all shapes and sizes and prioritize different ESG criteria.

Often, employees and customers of companies are the loudest voices when it comes to encouraging companies to be more sustainable, instituting  good employment practices, ensuring diverse leadership and being forthcoming and transparent about their political spending. 

Far from making them adopt unwelcome strategies, investors who engage with company management must make a sound business case - supported by research and data- about the long-term benefits of these practices. Most, if not all companies, elect to make these changes and are not coerced by investors, consumers or employees. 

Far from being combative, many investors who practice shareholder engagement on ESG-related topics are known to advance their objectives through civil conversations with company management. Their goal is to unlock value and improve shareholder return.

Many companies have broadened their expression of corporate values to prioritize a wider range of stakeholders. Companies recognize that their employees and customers care about their corporate values. Today, companies recognize that their purpose is more than simply serving shareholders and they have a responsibility to ensure that they are not maximizing profits at the expense of the environment and society

Most companies need to serve a variety of stakeholders including employees, the community and the environment too. ESG data is information that helps investors to identify material factors that influence a company’s health and measure a company’s environmental, social and governance performance.