Engagement a necessary ingredient for impact
The absence of an existing, well-defined ESG engagement framework should not be a reason for inaction
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THE pandemic has accelerated interest in ESG investing - which is generally taken to mean investing with environmental, social and governance considerations - as investors reflect on a more holistic approach beyond just the pursuit of financial returns.
There are two primary ways to invest in ESG: investing in an ESG-labelled product such as a green bond, or running investments through a set of ESG criteria.
The typical ESG toolkit - from negative/positive screening, thematic investing to ESG-integration in investment analyses - enables investors to build an investment universe to meet their definition of ESG investing. The process also identifies companies that might benefit from a stronger push from investors to improve their ESG performance. Taking the next step to engage these companies on ESG issues is increasingly seen as a key to investing for impact.
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