You’re socially and environmentally conscious and you want your investment portfolio to match your values. Enter responsible investing.
Responsible investing is an investment strategy where fund managers follow guiding principles that are about more than just the financial performance of funds. Instead, they decide which funds to select based on environmental, social and corporate governance factors.
There are different forms of responsible investing like socially responsible investing (SRI), impact investing, and environmental, social and governance investing (ESG). These approaches share similarities but are each tailored towards different types of investors and fund selection criteria.
The ESG approach
Environmental, social and governance investing (ESG) is one of the broadest approaches to responsible investing. It isn’t tied to one exclusive moral or ethical purpose; it’s a process that allows fund managers to take a more holistic look at all of the ESG factors that could influence the performance of an investment. Fund managers who follow ESG principles consider the following factors in their investment decision making process to assess risk and return.1
- climate change
- greenhouse gas (GHG) emissions
- resource depletion, including water
- waste and pollution
- working conditions, including slavery and child labour
- local communities, including indigenous communities
- health and safety
- employee relations and diversity
- executive pay
- bribery and corruption
- political lobbying and donations
- board diversity and structure
- tax strategy
Responsible investing is about more than just the financial performance of funds.
Today, many fund managers incorporate ESG values into their fund selections. These individuals, including several of London Life’s own fund managers, have shown their commitment to this practice through signing the United Nations-supported Principles for Responsible Investment (PRI). These 6 principles were designed by an international group of institutional investors and approved by the United Nations Secretary General.
The PRI provides a list of actions fund managers can follow to make ESG principles a part of their investment practice. The PRI protects the “long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole”.2
Talk to your financial security advisor if you’d like to learn more about whether responsible investing is right for your portfolio.