People talk about ESG investing as if it is a different form of investing from “normal” investing. I don’t see it that way.
I consider ESG investing as a more advancde way of evaluating an investment opportunity as “non-ESG” investing, or “normal” investing.
Incorporating ESG metrics into the evaluation of a business adds an additional layer of consideration that would not exist otherwise. With that said, it seems illogical to intentionally refrain from considering ESG when looking at investments.
ESG is often used to determine the social impact of a business, although it is more of an indicator of operational practices than actual impact. Instead, I see ESG as a way of evaluating risk. Environment, Social and Governance are risk categories as much as they are attributes of a business.
Asset managers could benefit from analyzing risk in the context of sensitivity to these categories. It necessary in a rapidly changing world where the relationship between business and society is increasingly stronger.
- K