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Investing responsibly can work to achieve positive environmental or social results alongside attractive returns. One of the most versatile ways to do this involves integrating environmental, social and governance (ESG) factors into the investment decision-making process. This allows for an investment approach that is aligned with a particular investor’s values as well as traditional financial analysis.

Defining “ESG”

 

Environmental, social and governance refers to a set of factors useful for assessing companies’ behaviour and screening investments against them. The universe of ESG factors is large, and often specific to each industry. 

Many different activities are associated with ESG investing. Terms like “sustainable” and “impact investing” are often used interchangeably. However, these approaches can differ in their strategies and objectives. Ultimately, these three letters can mean many different things. It’s why choosing an investment partner that understands your aims is so important.

 

The evolution of ESG

 

As a concept, responsible investing is not new but over the last decade ESG investment strategies have evolved considerably. Recent research suggests that an estimated $23 trillion is now invested according to ESG principles: 

 

TIMELINE VISUAL - [Add a new 2016 point to this visual: “An estimated quarter of the world’s assets under management are invested according to ESG criteria”. Source: http://www.gsi-alliance.org/members-resources/trends-report-2016/]

 

Opportunity on a global scale

 

The United Nations’ Principles for Responsible Investment (PRI) were developed to incorporate ESG issues into investment practice. 

 

When the UN Sustainable Development Goals (SDGs) were launched in 2015, they helped to provide targets for these principles: 17 goals designed to shape a sustainable future.

 

According to a study by the Business and Sustainable Development Commission, achieving the SDGs could potentially create opportunities worth an estimated $12 trillion by 2030.  
http://businesscommission.org/news/release-sustainable-business-can-unlock-at-least-us-12-trillion-in-new-market-value-and-repair-economic-system

http://report.businesscommission.org/uploads/Executive-Summary.pdf 

Then


ESG and responsible investing have become watchwords for anyone with an eye to the future. Research has also shown that paying attention to sustainability can actually help boost financial returns, linking positive impact with performance. Companies that score highly on ESG criteria often enjoy more sustainable revenue streams. Investing in these companies also helps to lower their cost of capital and can deliver better financial performance, making this an increasingly compelling way to invest.

ESG: a powerful investment strategy that does not compromise potential returns

 

ESG and responsible investing have become watchwords for anyone with an eye to the future. Research has also shown that paying attention to sustainability can actually help boost financial returns, linking positive impact with performance. Companies that score highly on ESG criteria often enjoy more sustainable revenue streams. Investing in these companies also helps to lower their cost of capital and can deliver better financial performance, making this an increasingly compelling way to invest.

 

How to invest responsibly

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Notes

1.
Source: Deutsche Bank Wealth Management. AuM data as at February 2018.
2.
Past performance is not indicative of future returns.
3.
Certain strategies are available only for “Qualified Purchasers” as defined by the U.S. Investment Company Act of 1940 and ”Accredited Investors” as defined by the U.S. Securities Act of 1933.


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