ESG Investing – what’s it all about?
There’s been a rising trend in Environmental, Social and Governance (ESG) Investing in recent years and it’s set to stay. So ESG Investing – what’s it all about?
ESG considers the way a company is managed through its governance; its impact on society, such as diversity and inclusion policies; and environmental issues, such as its carbon footprint.
Here are some of the factors considered under ESG:
| Environmental | Social | Governance |
|---|---|---|
| Carbon emissions | Treatment of staff and customers | Management and Shareholder payments and disclosure |
| Toxic emissions | Diversity and inclusion policies | External scrutiny and review |
| Carbon footprint of products including energy and fuel usage | Bribery and corruption policies | Independence and diversity of the Board |
| Vulnerability to climate change | Data security and customer privacy | Transparent accounting practices |
| Recyclability of packaging | Authenticity of marketing and advertising | Fair attitude to tax |
| Responsibility and reliability on water usage | Product safety and quality | Equal voting rights for shareholders |
The answers to these questions won’t necessarily bring ‘full marks’ in each category. The importance of them also depends on the sector of the company. For example, water usage and reliability upon it would be pertinent to certain manufacturing industries, but is not so relevant to an investment in a financial services company.
Innes Reid and ESG
When constructing our client portfolios, we give consideration to ESG factors. In a recent due diligence exercise, a leading global asset manager independently reviewed Innes Reid’s client portfolios and concluded that the ESG score was high.
For example, 39% of our medium risk portfolio is invested in companies with a high rating for ESG. This compares very favourably to the sector average of medium risk investment funds which contained only 30%.*
At Innes Reid, we consider ESG alongside many other factors before creating your portfolio. Other factors include investment style, competitor analysis, investment history, size of fund, inflows and outflows and how long the management team has been in place. We can also build bespoke portfolios with an increased emphasis on ESG to meet individual client preferences and objectives.
Remember that the value of investments and any income received from them can fall as well as rise and you may not get back what you invested. Most investments should be considered as a medium to long term commitment, meaning you should be prepared to hold them for at least 5 years. Past performance is not a guide to future returns.
Why choose Innes Reid?
We are also aware of our own ESG profile. We are an Independent Chartered Financial Planner, a status only awarded to firms with a “commitment to developing and maintaining the knowledge and capability of their people”. It also shows that we abide by, and adhere to, a serious code of ethical practice and demonstrates our very clear commitment to our customers.
Being ‘Responsible’ is one of our brand values. We make a difference through sponsorships, staff training, charity work, recycling, apprenticeships and supporting small businesses.
Since 1999, we have been providing truly independent financial advice and support to both private and corporate clients in Cheshire, North Wales, Wirral, Manchester, Liverpool areas and throughout the UK.
Rest assured, when investing through Innes Reid you will be having positive influences on various environmental factors.
*Results taken from an independent survey on 31st July 2020. Data source: Morningstar, Inc., MSCI & Bloomberg L.P.
ESG Investing – what’s it all about? If you would like a consultation with one of our Independent Financial Advisers about ESG or financial planning for your future, please contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.
First consultations are free and appointments can be made outside of working hours, face to face or over Zoom.
