Benefits for Investors
An ethical approach to investing used to focus on avoiding so called “vice” stocks, companies involved in, for example, munitions, tobacco, alcohol or gambling. More recently, this has also included companies that exploit natural resources, particularly those in mining and fossil fuel extraction. It was generally considered that this type of investment led to lower returns, because it excluded many high performance companies in those very sectors.
However, with ESG investing, those companies that demonstrate corporate responsibility by showing commitment to minimising any harmful impact on the environment or communities in which they operate are not necessarily excluded from consideration. Empirical evidence now suggests that utilising ESG metrics to invest in sustainable assets is just as profitable, if not more so, particularly during times of market stress.
In many jurisdictions, the provision of non-financial data incorporating ESG metrics is now a mandatory requirement and this is accelerating the adoption of ESG investment screening. Institutional investors now routinely screen companies based on ESG data, and exclude those with low scores. This clearly has a positive impact on those companies who score highly and may be included in one of the many sustainability indices.
Individual investors concerned about sustainability and wishing to carry out their own screening using ESG metrics are becoming better served by both companies and service providers. They are also able to directly invest in mutual funds and ETFs that track sustainability indices.
QSE have implemented a web platform that allows investors to view and assess the performance of QSE listed companies. It can be found here: QSE Sustainability Platform