“People today are concerned about the environment and want to make positive change,” he said. “There are certain new tailwinds that governments are providing that voters are interested in. It is part of the platforms for various politicians. When they come to power and promise that money will be spent in these areas, there will be a demand for green and green businesses and services. “
The problem of lost returns does not seem to be an issue for investors any more. Various ESG or socially responsible indices indicate outperformance. Good governance and business models are now much more indicative of growth. Take, for example, oil and gas, which are still needed but have a shrinking customer base. It’s not an area where customers can see long-term growth, Priest said. The key, however, is customizing a portfolio to suit a client’s preferences.
“Some companies, like Microsoft, ranks high on ESG, but aren’t necessarily clean energy companies, and sometimes that’s primarily the case in people’s minds. Some companies ensure that human rights and inequality are addressed, while others take the energy transition into account.
“There are several ways to create a portfolio with a high ESG ranking for active portfolios. Often companies don’t just invest in companies with clean balance sheets. In many cases, they also work with these companies and make recommendations or suggestions for changes. “
Getting involved in a company and using proxy voting is an increasingly popular approach for investors and a way of making change happen. It’s a long way from the early days of ESG, when certain companies, such as tobacco or arms companies, were simply excluded.