Good investors have long known that there is more that drives investment returns that just what is reported in financial reports.
Responsible investors all understand that companies or assets won’t thrive whilst ignoring environmental issues (pollution, climate change, water and other resources scarcity), social issues (local communities, employees, health and safety), corporate governance issues (prudent management, business ethics, strong boards, appropriate executive pay) or ethical issues.
In formal terms, responsible investment is a process that takes into account environmental, social, governance (ESG) and ethical issues into the investment process of research, analysis, selection and monitoring of investments.
There is a broad array of methods that responsible investors use to manage these non-financial risks – from excluding companies involved in controversial industries, to supporting the most sustainable companies, to a sharp focus on ESG risks, and using ownership to engage with companies.
This diversity of approach is a plus for the public who can find an option that matches your own values, concerns, risk profile and life stage.