Environmental social and governmental issues are no longer a thought but an important aspect of investment decisions. Gone are the days when investors only raised concerns about sustainability but are increasingly pressing fund managers to consider ESG issues while formulating investment strategies? Likewise, most investment leaders have had to seek ESG advisory to seek ideas needed to address the growing needs of ESG-focused investors.
While investors are still focused on the amount of returns they are likely to reap, there is also growing concerned with the kind of impact investments are having on the environment and social aspects of life. Tying environmental, social, and governance issues to investment decisions stems from the growing understanding that investments have a key role in tackling urgent challenges that continue to grip the human race.
Integrating ESG In investments
More than ever, investors and stakeholders are focused on ensuring boards effectively address climate change issues, waste pollution, and water resource depletion. Likewise, investors are also paying close watch to work conditions, human rights, and employee diversity before putting their money to use in investments.
Leaders of large investment firms are already admitting growing interest and care about sustainability as ESG investments become a central theme in the investment world. A survey of 70 senior executives at 43 global institutions investing firms, including BlackRock, Vanguard, and State Street, has underscored how sustainability has become a key theme among investment firms.
Corporations are also moving from enhancing ESG awareness to playing a proactive role. Managers and directors are also considering the impact that ESG has on their roles in overseeing strategies amid growing investor pressure.
Growing Shareholders ESG Pressure
Increased focus ESG focused investments do not surprise investors as investors are piling pressure on investment firms and corporations to seek ESG advisory services to gain much-needed insight into handling personal and ecological dilemmas through investments. In most shareholder meetings in the recent past, investors have passed a resolution urging investment firms to be well equipped in handling problems ecological problems and social issues and generating returns.
Shareholders are becoming bold and vocal in pushing for resolutions that can save the environment, which is under pressure amid the climate change phenomenon. Likewise, shareholders are pushing and advocating for solutions that have the potential to address social dilemmas such as diversity.
Consumer products companies have been the hardest hit amid the drive to address ESG issues. Shareholders have tabled solutions aimed at curbing deforestation at most consumer products companies such as Procter and Gamble. Likewise, energy companies focused on fossil fuel have also felt the full brunt of ESG focused investments as investors push for more solutions to curb carbon emissions.
The determination by investors to back ESG resolutions at yearly meetings should continue to pile pressure on businesses. In a bid to handle and address investors’ concerns before voting, corporations and investment firms will have to seek ESG advisor services to be well equipped.
Need for ESG Advisory Services
Amid the growing push for solutions to address ESG issues, it is still early to be positive. Amid a wide pool of well-argued shareholder resolutions on environmental and personal problems, some are still struggling to get the 50% needed support in the meeting. While over 233 social and ecological shareholder solutions went to vote the past year, only half received more than 20% support.
However, that is expected to change going forward as it becomes clear some of the ESG proposals can have a positive financial implication on companies and investments. Faced with the dilemma of finding a balance on ESG solutions, asset managers will have to deploy ESG advisory services.
ESG advisory services similar to those offered by the likes of the Altruist league have the potential to help corporations and investment firms vote in favor of relevant and valuable ESG issues. Likewise, such services should help investment firms vote against ESG proposals that are misaligned with shareholder value.
While shareholder’s ESG proposals have the potential to drive the adoption of more responsible business practices, there needs to be a balance to ensure such policies don’t end up eroding the expected returns.
