The evolving ESG strategic imperative

• ESG investing is becoming a part of the mainstream
• ESG as a holistic approach
• ESG investing is a new engagement lens?

As ESG investment accelerates even more, among other strategies and traditional investing, short- term vision is no longer applicable to shareholders. Given the demand from both society and companies for ESG investing, the market is experiencing a change in asset owners’ behaviors. ESG investing refers to the three central factors in measuring the sustainability and ethical impact of an investment. ESG factors offer portfolio managers added insights into the sustainability of a company’s strategy, as well as the quality of its management, culture, risk profile, and other characteristics.

The Holistic Approach

Governance has been the most well-established component over the years in corporate practices. The so-called “holistic approach” to investments raises the importance of ESG pillars in looking at not only integrated risks but also opportunities. Investors are now convinced that ESG is essential to long- term value creation.

A Threat or Opportunity?

In a study conducted by the consulting firm EY, environmental issues and climate change are among the three biggest threats to strategic success, alongside disruption competition and cybersecurity. ESG management also poses as one of the three biggest drivers of strategic success in the next three to five years. It is not only a threat, but it is also an opportunity!

         The integration of ESG across investment processes leads these factors to be relevant to mainstream investing. ESG factors are increasingly part of the mainstream investing strategy. Sustainability is now a term that translates the safety and trust lenses in the relationship between investment managers and companies. Products, safety, data, and operations are all affected.