Environment, Social, and Governance
Each of the 7 ESG strategies has its own framework that must be respected and selectively applied depending on factors such as industry, market, jurisdiction, business plan, and engagement with governments, stakeholders, and capital markets.
The 7 ESG Strategies in our DNA
01
Values First
Negative screening based on a specific set of values
03
Impact
Creating a positive environmental impact
05
Integration
Efforts to integrate aspects of ESG
07
Minimum Standards
Applying existing principles, such as the Guiding Principles of Business and Human Rights
02
Value First
Leveraging ESG factors to maximize returns
04
Thematic
Stand to gain from long-term standards
06
Engagement
Shareholders Engagement & Advocacy in such as executive compensation and approaches to climate change
Regulations
ESG performance and corporate disclosure
In recent years, ESG policies and regulations have gained increasing attention from investors, consumers, and policymakers. Companies prioritizing ESG factors in their decision-making processes may benefit from improved brand reputation, access to capital, and long-term growth potential.
Some examples of ESG policies and regulations include the Paris Agreement on climate change, the United Nations Guiding Principles on Business and Human Rights, and the Corporate Sustainability Reporting Directive proposed by the European Union. Many countries have also established national ESG policies, such as Japan's Corporate Governance Code and Canada's Climate Action Plan.
ESG Financials
ESG and financial performance
Financial materiality refers to the significance of a monetary sum in a company's economic context, while ESG materiality refers to the significance of an ESG factor and its impact on a company.
Companies and executives that successfully invest in appropriate ESG strategies have demonstrated higher financial performance and greater access to funding, key partners, joint ventures, and government support.
Asset pricing models typically utilize some form of discounted cash flow to determine an asset's current price. Integrating ESG risks into the calculation involves adjusting the risk basis in traditional asset pricing models.
ESG Growth
The growth of sustainable investments
Historically, investment decisions and strategies have been driven by the positive relationship between risk and return, with risk being measured based on historical performance data. However, ESG considerations have been largely left out of investment analysis due to difficulties in measurement.
In recent years, the growing demand for ESG clarification and regulation has led to a clearer definition of ESG risk management, making it more applicable to financial modeling, value creation, and the foundation for sustainable investment. As a result, more executives and investors are recognizing the importance of incorporating ESG factors into their decision-making processes.
