As impact investors, a lot of emphasis is put on reviewing ESG (environmental, social, and governance) factors as they pertain to investments. ESG factors are what separate impact investments from traditional investment options. When reviewing options with their advisers, many new impact investors choose to focus on the first two factors. Environmental and Social. Why? Because they are easiest to understand.
For many investors, Environmental factors are what brought them to impact investing in the first place. This factor allows advisers and their investors to review companies with environmental missions. They could be focused on combatting climate change, reducing waste, eliminating pollution, or creating alternative energy sources. It also helps them remove companies from their stock portfolio that are doing damage to their local environments or are a major source of pollutants entering the atmosphere (think oil and gas companies).
Social factors showcase companies that have a strong socially responsible outlook. They may contribute back to organizations and causes either locally, nationally, or globally that help combat hunger, stop the spread of disease, or other worthwhile causes that make a difference on our planet.
Governance, however. Governance is a factor that is often overlooked but equally as important. Governance factors illustrate whether a company operates with accountability, integrity, and equality in all of its practices. Governance is often reviewed independently by referring to the policies and procedures a company follows not only when addressing reports and shareholders but in their day-to-day operations.
Companies with strong governance factors often have a racially and gender diverse board of directors, fair and ethical work standards (think equal pay for equal work), and a code of conduct that is practiced among all levels – from interns, to executives, to the board itself.
Many corporations with high governance factors have executive pay-caps and bonus reviews, are transparent about political spending and candidate backing, and contribute a percentage of their earnings back to their community in some way.
Your investments are a reflection of your values. Advocate for your values with the companies you have trusted with your investments. Interested in reviewing ESG factors as they pertain to your values? We offer many different socially responsible portfolios and offer custom screens including:
- Shareholder Advocacy
- Community Impact Investments
- Employee Relations, Environment
- Product Safety
- Corporate Governance
- Military Contracting
- Nuclear Power
- Animal Testing
- Avoidance of Repressive Regimes.