Finance professionals, how do you incorporate environmental, social, and governance (ESG) criteria into your investment recommendations?

While we do not start from a pure ESG recommendation framework, if a client has a particular interest in it either generally or issue-specific we are more than happy to dive deeper and design a values-aligned approach. I first strive to understand exactly what issues and/or values are most important to my client. From there we are able to filter down and use varying levels of ESG criteria such as “ESG aware”, “ESG integrated”, or “ESG impact leader” along with restricting or limiting certain areas such as tobacco, weapons, oil, etc. I do also want to always make it clear that by restricting the large universe of investments it may potentially lead to under-performance depending on the economic environment, but if it is important to them, it is important to me, and always happy to implement from there.

Finance Professionals should device step-by-step holistic guide on ESG integration suiting their interest. To begin with, it is advised to have an ESG strategy in place which guides all the investments in the direction of impact creation based on E, S or G factors followed by ESG screening and analysis of individual companies. Secondly, benchmarking of market players on annual basis from the industry of your choice helps in devising performance trends of these companies around non-financial risks such as global warming. Lastly, due diligence of ESG-focused investments such as green bonds help in alignment of investments with broader ESG strategy.

We integrate ESG factors by analysing companies' sustainability practices, assessing risks, and identifying long-term value. This involves extensive research into environmental impact, labour practices, diversity, and corporate governance. We prioritise investments that align with our client's values and seek opportunities with robust ESG performance, believing they mitigate risk and drive sustainable returns. Engaging with companies on ESG issues and advocating for transparency and improvement is integral. Ultimately, integrating ESG enhances our ability to deliver financial gains and positive societal and environmental impact.