Climate change, burgeoning pollution, resource’s scarcity, inequality, among others are some of the defining issues of our time, and we are at a turning point which could change the future.
With risks emanating from environment, social and governance (ESG) factors increasing; it is important to assess where the company faces risk on account of ESG parameters as ignoring these risks can have far reaching consequences, including impact on the shareholder value.
ESG issues can impact company’s positioning and have financial impacts. In the past, continuity of several businesses has been risked due to disregarding ESG practices, which in turn impacted their business operations, reputation and the shareholder value.
Disclaimer - The above parameters are provided for explaining key material ESG issues which have the potential to impact the enterprise value. The ESG issues selected may not be an exhaustive list of issues and there can be other set of issues / methodology which may affect the ESG Scores.
Although ESG issues often get highlighted owing to extreme events, we feel that an inclusive approach of evaluating businesses on ESG parameters can go a long way in reducing the investment risk and enhancing trust quotient of investors.
The advantages of proactively dealing with ESG issues not only help companies to alleviate the shareholders concerns but can also provide access to a large pool of capital, build a strong brand, create value, and encourage long-term sustainable growth. The companies with strong ESG propositions may create value through:
Note - 3The above strategy is based on current views and is subject to change from time to time. 4The above mentioned ESG score is subject to change based on the changes within the overall ESG framework.
Disclaimer – The use of word ‘Profit’ does not in any manner imply or suggest the performance of the Scheme of Invesco Mutual Fund. It should not be construed as a promise for returns and safeguard of capital. It does not guarantee protection against a loss in a declining market. The readers should exercise due caution and/or seek independent professional advice before making any investment decision or entering into any financial obligation based on information, statement or opinion which is expressed herein.
Invesco truly believes in merits of ‘responsible investing’ and for more than 30 years, globally we have been demonstrating our commitment to responsible investing by actively encouraging ESG inclusive practices across every area of the business.