SUSTAINABLE INVESTING › Overview & History
Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate competitive financial results and positive societal impact.
With roots in the 1700s, sustainable investing was first practiced by Quakers and Methodists to condemn factors such as smuggling, conspicuous consumption and the slave trade. Since its advent, SRI investing has expanded beyond religious parameters to encompass a wider focus on environmental, social and governance factors. Collectively, these elements are known as “ESG” and are the foundation for sustainable investing research and analysis.
What is ESG?
ESG has become shorthand for investment methodologies that embrace ESG or sustainability factors as a means of helping identify companies with superior business models.
"E" focuses on companies’ ability to manage operational and reputational risks; reduce operating costs and volatility associated with energy and other natural resources; and take advantage of business opportunities created by the shift towards a more sustainable economy. Examples include:
- Climate Change
- Emissions & Waste
- Resource Efficiency
"S" focuses on companies’ ability to create value through a productive workforce, high-quality products and positive interactions with communities. Examples include:
- Diversity, human capital & safety
- Product integrity & supply chain management
- Community Impact
"G" focuses on companies’ ability to align the interests of management with those of shareholders over the long term. Examples include:
- Board & executive diversity
- Corporate structure, accounting & transparency
- Executive compensation