12th March 2015
ESG stands for Environmental, Social and Governance. There is substantial evidence suggesting that paying attention to ESG factors while performing investment analysis and decision making, may offer investors potential long-term performance gains. A Goldman Sachs study suggests that companies that are considered leaders in ESG policies are also leading the pack in stock performance by an average of 25%.* In essence, ESG is often interpreted as a means for discovering sustainable and superior business models.
ESG factors give more insight into the firm’s inner structure and its integration within the society. Often companies that pass such screening are identified as leaders in their industries, they tend to be managed more adequately and are more forward-thinking, and they follow sustainable long term policies.
Important considerations of ESG investing:
- Environment - resource management and pollution prevention; reduced emissions and climate impact; environmental reporting/ disclosure.
- Social: workplace diversity, health and safety of employees, human rights; product safety and quality; community relations, responsible lending.
- Governance: fair executive compensation; board accountability; shareholder rights; reporting and disclosure.
At Astra, we firmly believe the ESG approach to investing adds value, and we are inclined to invest with fund managers who follow such strategies. Investing in the developing world is a primary focus here, as we want to encourage ethical practices that give everyone an equal chance. In emerging economies, a significant number of people have been unable to access the kinds of economic opportunities that lead to a sustainable livelihood. Lack of opportunity limits people’s ability to achieve their full potential and in its most extreme form, it can mean lack of access to the fundamental rights of adequate healthcare and education. Financial exclusion and a lack of skills training can be major hurdles that are difficult to overcome. This hampers economic growth and burdens societies for generations to come.
We channel donations into credible organisations delivering sustainable and transformational projects - to lift those living in extreme or relative poverty off the bottom rungs of the ladder and stimulate economic growth from the grass-roots up.
To do so, we are working closely with Alquity Investment Management. Alquity Investment Management offers a range of emerging market equity funds. A responsible investment process using forward-looking ESG minimizes risk and ensures that the companies invested into are operating in a considerate and sustainable way. Alquity believe that wherever we seek to extract value for investors, we must look to put back, and so Alquity donates up to 25% of management fee revenue to support development projects in the regions where they invest.
To date, Alquity has transformed the lives of over 20,000 people by providing the tools that these entrepreneurial people need to lift themselves and their families out of poverty.
* Goldman Sachs - Goldman Sachs Global Investment Research, “Overview: Introducing GS SUSTAIN,” July 2, 2007.