From Shareholders to Stakeholders: Investments lead by social values

From Shareholders to Stakeholders: Investments lead by social values

January 20, 2020 | Rita Li

Share

Having started on the fringe of investing, Responsible Investment, which includes Environmental, Social and Governance (ESG) integrated investments, now represent 38% of the Canadian investment industry.*

 

In recent history, people around the world have experienced climate change at an accelerated pace. Under the industrial era’s dogma of maximizing profits for shareholders, we have collectively caused devastating effect to our environment. The old way of conducting business has become too costly. For investors, ESG is increasingly important for identifying companies that are well positioned for the future.

 

Any investor can join the ranks of ESG by keeping its investment framework in mind and making investment decisions guided by their social values.

 

What is ESG integration? 

 

ESG integration entails researching and factoring in environmental, social, and governance issues, in addition to traditional measures such as valuation, leverage and earnings projection. 

 

ESG was first coined in 2005 in a landmark study entitled “Who Cares Wins.” The story of ESG investing began in Jan 2004 when former UN Secretary General Kofi Annan wrote to over 50 CEOs of major financial institutions, inviting them to participate in a joint initiative. The goal of the initiative was to find ways to connect better investment markets with more sustainable societies. 

 

The integration of the ESG framework can be considered under the following four quadrants:


Image Source: Forbes - The Remarkable Rise of ESG

 

Academic studies have shown that integrating ESG into investment decisions does not subtract from performance but delivers better long term return.** Any investor can join the ranks of ESG by keeping its investment framework in mind and making investment decisions guided by their social values. Here are some more resources available to learn about The future of ESG integration.

 

Share with me how you are incorporating ESG into your investment process and ask me about how I can help. 

 

Sources & Citations

*RIA Canada 2016, Canadian Responsible Investment Trends Report

**George Serafeim, Bob Eccles and Ioannis Ioannou "The impact of corporate sustainability on organizational process and performance"

 

Related Articles

Wealth

May 2024 Market Update

There is never a dull moment in the markets. A lot has happened in the first quarter of 2024. We have strong economic prints out of the U.S. while Canada has decidedly decelerated. Inflation in the U.S. especially has been stickier than anticipated. The...

Read more

Wealth

January 2024 Market Update

The latest rate hiking cycle has been the most aggressive cycle in the last four decades, creating a new paradigm of investment decisions. Prior to 2022, few people were interested in discussing fixed income; now, investment conversations have turned...

Read more

Economy

October Market Update

We’ve weathered through a difficult period in the third quarter of 2023. While August and September tend to be seasonally weak in the stock markets, they tend to be followed by rallies in October, this seasonal pattern was disrupted in part by the Israel...

Read more

July Market Update

In the quieter summer months, we observed headline inflation trending lower while central banks on both sides of the border remained cautious and reiterated their commitment to bring down inflation to target, through rate increases as well as more vigilant...

Read more

March Market Update

By now, a lot has been written in the media on the collapse of SVB bank. There were some unique attributes that did not impact the other banks that were more diligent in monitoring their risks. What is important for us is that the authorities such the...

Read more