There have been a thousand-and-one articles written since the pandemic on people’s changing attitude to work. Millennials and the generations that follow them – so we are told – want different things from work. Flexibility, the option of working from home and, above all, to work for a company that shares their values: that values purpose as much as profit.
It is not surprising then that we are hearing more and more from companies about ESG – their environmental, social and governance credentials. What really is ESG? And can it possibly matter as much as profits? After all, without profit you cannot pay your employees: you cannot re-invest in the business and you cannot pay dividends to your shareholders.
You could argue that companies’ concerns with ESG are not new. The origins could be traced back to the 1800s when religious groups such the Quakers and Methodists ran their businesses according to socially responsible principles, and established socially responsible investment guidelines for their followers.
More recently – in 2006 – the United Nations launched a set of six investment principles which perhaps started the incorporation of ESG into mainstream investment practice. Simply put ESG criteria judge how a company meets its environmental obligations, how it manages relationships with employees, suppliers, customers and the local community and the principles, composition and behaviour of the leadership team.
By the same token ESG investing looks to invest in companies that espouse those values. This, in some ways, brings us back to the generations mentioned above. It is small wonder then, that companies are paying more and more attention to meeting their ESG obligations. Of course the bottom line remains important – although many of us remember Uber famously being valued in the billions despite saying that it may never make a profit – but it now seems that both investors and employees are using other criteria to judge companies. You are likely to hear a great deal more about ESG and impact investing in the months and years to come.
If you want to know more about ESG investing with Gale and Phillipson, please follow this link here.
The content of this blog is for general information only and should not be considered advice. Professional advice relating to your individual circumstances should always be sought prior to making any decisions or taking any action. Your capital is at risk. The value of investments can go down as well as up in value and you may get back less than you invested. All details were correct at the time of writing.
Reference – BL133 – Oct – 2021