The integration of sustainability into investment practices is considered imperative by now. Sustainability is a complex concept and the integration of its (Environmental Social and Governance – ESG) aspects can be accomplished in many different ways and with a varying depth and focus. Depending on your profile, needs, and ambitions, we are here to help you find the right approach. This could be as part of policy and strategy formulation, system design and implementation, due diligence, portfolio monitoring and management, reporting, or in other ways. Integrating sustainability aspects into the investment cycle and throughout your practices will help manage both risks as well as opportunities for value creation.
In response to global megatrends, new societal guiding principles such as the Sustainable Development Goals (SDGs), and the Paris Climate Agreement have changed prospects in the financial market, reflected e.g. by the increasing commitment of the market to the UN Principles for Responsible Investment (UNPRI) as well the regulatory push on sustainable finance in Europe. Responsible Investment and the comprehensive integration of environmental, social and governance (ESG) aspects into investment decisions and processes are considered a ‘must’.
There are numerous ways of integrating ESG and/or sustainability into investment processes,. Strategies range from more traditional ESG approaches to dedicated impact investing commitments, with many options in between. The right approach for an investor is the one that fits the investment strategy and focus, organizational culture, and the characteristics of the investment portfolio. It should further fit the position in the investment chain and be aligned with the demands of important stakeholders.
In order to find a suitable approach to Responsible Investment and implement and operate it successfully, we believe that three key questions (the Why, How, and What) have to be answered. The Why should clarify the motivation of the investor to integrate sustainability aspects, while the How should show which approach and strategy he uses to do so. Finally, the What includes all the Responsible Investment and ESG related activities and measures that the investor and his/her portfolio conduct throughout the investment process. In our work and with our services, we strive to support our clients in answering these three key questions for themselves.
DRIVERS FOR AND BENEFITS OF ESG MANAGEMENT
After a brief introductory chapter on ESG, this article will show that the relevance of the consideration of ESG aspects for investors has significantly increased, especially in recent years. Based on these explanations, we will make suggestions for implementing an pragmatic, but effective management approach relating to different scenarios by showing examples of how risks can be reduced and optimisation potential be utilized by implementing essential ESG management components..