Why ESG factors matter
Financially material environmental, social and governance (ESG) factors can affect the performance of investments. We believe that when companies and other security issuers manage these factors well, they are more likely to be more efficient, less exposed to regulatory and reputational risk, and offer opportunities for our client portfolios.
As a result, we believe assessing financially material ESG considerations in the investment decision-making progress strengthens risk management and may contribute to long-term financial returns.
Environmental
Issues related to the quality and functioning of the natural environment and natural systems
Examples:
- Greenhouse gas emissions
- Climate change resilience
- Pollution (air, water, noise, light)
- Biodiversity/habitat protection
- Waste management
Social
Issues related to the rights, wellbeing and interests of people and communities
Examples:
- Workplace safety
- Cybersecurity and data privacy
- Human rights
- Local stakeholder relationships
- Discrimination prevention
Governance
Issues related to the way companies are managed and overseen
Examples:
- Independence of chair/board
- Fiduciary duty
- Board diversity
- Executive compensation
- Bribery and corruption
Firmwide ESG integration resources
Across investment groups, ESG integration approaches benefit from shared global knowledge and resources. In addition to the ESG insights of individual investment desks, we have developed and are implementing globally consistent, data-driven proprietary ESG scoring.
Further reading
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