Environmental, social and governance (ESG) integration has become a salient component of best-practice investment management in recent years.
In 2006, the Principles for Responsible Investment (UNPRI) – a set of six investment principles encouraging ESG matters to be incorporated into investment practice – were launched by the UN. The principles were developed by investors for investors, and Hermes became a founding signatory.
For Hermes, ESG investing is not a recent phenomenon. Responsible investing is core to our business, and we have been at the vanguard of ESG investing for more than three decades. We integrate ESG across all our strategies.
But what is this movement? To truly understand ESG investing, it is important to explore the evolution and development of this investment approach.
From SRI to ESG Investing
Join us as we journey through a 200-year history.
There are many definitions of ESG. Here we present ours:
ESG investing includes environmental, social and corporate governance information in the analysis of financial metrics in order to gain a more expansive view of the risks faced by companies and their potential returns. It aims to improve portfolio risk-reward characteristics and therefore the prospects for long-term outperformance. By considering ESG matters, this approach also contributes to positive impacts on society and the environment.
ESG factors are a sub-set of non-financial indicators gauging the impact of a company’s corporate governance and social and environmental track records, such as managing its carbon footprint and treatment of workers, on its financial performance.
We believe that a responsible approach to investing is appropriate across all asset classes and for all investment strategies. Investors can mitigate ESG risks and capture opportunities through five distinct ESG strategies. Our aim is to help investors practically understand these strategies, regardless of the ESG methodology they adopt.