The quick read
- Many companies use environmental, social and governance (ESG) criteria to ensure they are running themselves responsibly. Fund managers use ESG considerations to identify risks and opportunities that could affect a firm’s long-term sustainability.
- A responsible investing strategy seeks to invest in companies that align behind ESG principles and engage with others to improve their behaviour.
- St. James’s Place is committed to investing responsibly, based on ESG criteria, across its portfolios, ensuring clients’ money is used as a force for good.
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By considering environmental, social and governance (ESG) factors when investing, you can use your money to make the world a better place and promote long-term sustainability.
ESG has become a popular shorthand for all the non-financial issues that affect business and investor success. It stands for ‘environmental, social and governance’ and represents a range of criteria companies use to help run themselves responsibly – and report the outcomes of their ESG practices to investors and others.
Investors also use the term ESG often. For example, an ESG stock is a share in a company that meets certain environmental, social and governance criteria. An ESG fund or exchange-traded fund (ETF) invests in many such stocks collectively.
St. James’s Place is committed to integrating ESG considerations into investment decision making. We measure and monitor the companies in which our fund managers invest, drawing on ESG criteria, to ensure we are using money as a force for good.
It also helps us identify a wide range of risks and opportunities that could affect companies’ share prices and long-term sustainability.
Fund manager Polina Kurdyavko of BlueBay says: “We believe incorporating ESG factors can provide a more robust and holistic approach to investment management, as well as enable us to meet client needs.”
Alistair Thompson of First State Investments considers it “prudent risk management and a fundamental part of our obligations to clients. To us, sustainability is not just a label, but a set of values by which we operate.”
Environmental, social and governance – ESG explained
Environmental criteria show how companies interact with the planet, including issues such as carbon emissions, recycling and plastic use.
Social criteria look at how they manage relationships with employees, suppliers, customers and communities – for example, over issues such as worker rights and inclusion.
Corporate governance concerns leadership issues, such as executive pay, internal controls and shareholder rights.
Generally, a company could be considered a responsible business by, for example, having credible net-zero carbon-emissions plans, looking after its employees and supply chains, and having sound management practices.
But a challenge for companies and investors is that – because data is currently patchy, albeit improving – it is difficult to define an objectively ‘good’ ESG company, and depends on what is being measured.
A lot of recent work is devoted to tackling this and, as industry minds increasingly collaborate, and frameworks and regulations evolve, measurement and reporting will inevitably become more standardised.
What St. James’s Place is doing
St. James’s Place has committed to all its investment portfolios becoming net zero by 2050, if not sooner, and to being a leading responsible business.
For example, we have set science-based targets to reduce carbon emissions in our operations and our investment portfolios. Initiatives include reducing staff travel; moving to 100% renewable energy; replacing inefficient appliances in properties; adopting digital signatures to save paper; and offsetting to achieve carbon neutrality.
In the social field, St. James’s Place continues to build a diverse, inclusive workforce; create a culture of learning and development; and work with sustainable suppliers.
We also have strong governance practices throughout our business, reflected in our membership of the FTSE4Good Index, Business in the Community – the Prince’s Responsible Business Network, the Good Business Charter and the UN Global Contact Network UK.
In investment, we have signed the United Nations-backed Principles for Responsible Investment, which promotes sustainable investment practices; joined Climate Action 100+, which engages with 167 top companies to move them towards net zero; and adopted the Task Force on Climate-related Financial Disclosures guidelines.
What you can do
There are many small things we can all do to improve the world around us. These include swapping to green electricity, reducing travel – and considering where your savings and pensions are invested.
The latter is one of the most impactful, and can be 27 times more effective at cutting your carbon footprint than eating less meat, using trains instead of cars, taking shorter showers and flying less combined1.
Our world is changing faster than anyone predicted. We believe responsible investing has a huge role to play in shaping a better world and building a sustainable future.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
1 Sustainable finance at Nordea, Nordea, 2019
Some of the products and investment structures documented within this article will not be available to our clients in Asia. For information on the funds that are available please get in touch.
- Many companies use environmental, social and governance (ESG) criteria to ensure they are running themselves responsibly. Fund managers use ESG considerations to identify risks and opportunities that could affect a firm’s long-term sustainability.
- A responsible investing strategy seeks to invest in companies that align behind ESG principles and engage with others to improve their behaviour.
- St. James’s Place is committed to investing responsibly, based on ESG criteria, across its portfolios, ensuring clients’ money is used as a force for good.
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