Manage risk better through environmental social governance risk analysis. Enterprise risk management can better inform investment decision making and improve investment company performance. Responsible investing can help build a more reliable resilient sustainable ethical investment management business.
Incorporate environmental impact of business social responsibility and corporate governance risk management into your investment and investment management decision making
ESG does not equate to poorer investment performance. The companies that have the best environmental social and governance principles framework and processes can be the best financial performers for longer. You do not need to sacrifice investment return for socially responsible business.
Think more virtuous escalation of ethical responsible financial reward with less uncertainty for longer
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Work with the best business practising businesses to create the best investment management business. Improving corporate governance and risk management can boost business performance to maximise productivity and profitability thus increasing investment returns.
Better run better performing businesses are businesses that people want to work for and stay at. In the climate of a growing skills gap better corporate governance and risk management can attract and retain business intelligence reduce costs and boost profit.
Integrate ESG analysis into investment analysis for the more socially responsible investing that achieves the outcome desired with less uncertainty
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Interest in ESG and sustainable investing runs strong for investment plan participants according to Natixis 2016 Survey of Defined Contribution Plan Participants. More than six in ten participants agreed they would be more likely to contribute or increase their contributions to their retirement plan if they knew their investments were doing social good.
Explore ESG factors when making investment decisions. Pick up practical responsible investment decisions.
What ESG risks analysed for more ethical sustainable successful investing?
ESG risks to analyse include:
- Climate change. How does a business impact on perceived and real factors of climate change. Its one reason why petrochemical businesses explore alternatives to fossil fuel to generate income.
- Diversity. How inclusive is the business recruitment policy and practice? Many studies suggest that the more diverse the employees and management team are the better protected and better performing the business. The business is better prepared to seize new business development opportunities.
- Looking after employees. Creating the right employment policies and procedures.
- Looking after customers. Even the most hard nosed executives are acknowledging the need to design products that customers are happy with. Profit at all costs is less sustainable. Reputational damage and claims for compensation have cost many a bank many a billions of pounds!
- Animal welfare. Concern about the welfare of animals is a large consideration for those investors seeking a thorough understanding of the company or industry being analysed.
- Corporate governance. The way a business does things should be the right way to do things. Are managers held to account? Are all stakeholders playing their part to manage the business better?
- Management principles framework and risk assessment process. What are the policies procedures and risk management controls that make up the management structure of a company? What value is placed on the risk culture and risk management systems? What is the relationship between CEO chairman board senior managers and all stakeholders?
- How are employees treated engaged and motivated? How desirable is it to work for the business under analysis?
- How are executives remunerated and how is their performance rewarded?
- How are employees remunerated and rewarded? What level of equality of pay is evident? How transparent is the business pay policy?
Who the investor customer is may dictate the desire for responsible investing. Institutional investors tend to seek more certain long term investment performance than rapid investment growth with accompanying high risk highly uncertain investments. Individuals maybe more likely to seek a quick big buck!
ESG risks are amongst the risks most feared by investors and executives. ESG risks represent the biggest threats to business survival and prosperity. Managing ESG risks better is not just more responsible it is more likely to lead to business success.
Businesses that are more transparent and more successful at managing business risks are more likely to attract investment and investors. Integrating ESG risks into an enterprise risk management principles framework and risk assessment process is a holistic way to manage risks better. An enterprise risk management strategy should drive and support the business strategy and objectives.
Businesses investors and investment management firms interested in understanding managing and reporting ESG risks should adopt an enterprise risk management philosophy.
An enterprise risk management approach to business decision making and investing will help protect the long term sustainability and achieve greater success with less uncertainty.
However what is an ethical responsible investment?
What is unacceptable to one investor may be acceptable to another. Is investing in nuclear power unethical due to environmental risk? How do you quantify ethical or responsible behaviour then compare with other businesses in same industry or different industry?
There is a high degree of subjectivity in ESG risk analysis. Who decides and their perception of risk can influence the end decision.
- What information is used in ESG risk analysis can impact on the end investment decision.
- Who judges the quality of the information?
- What secondary evidence is there to back the business own risk assessment?
- Are the critical risks under control?
- Is the business taking enough risk or being innovative enough given that a lack of ambition or creativity can make a business unsustainable zombified dying on the vine!
The value of the business largely unquantifiable in financial terms. There are qualitative ways to assess risks that add or destroy corporate value.
iso 31000 and iso 31010 can be useful tools to independently assess the holistic management of risks including environmental social and corporate governance.
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8th November 2019 Norways Wealth Fund Building On Responsible Investing Policy
Norway 1 trillion dollar wealth fund is the biggest wealth fund in the world. It is built upon its oil and gas investments decades ago. However it is prohibited from investing in certain investments Norways government deem unethical. It is looking again at its investment policy including not investing in greenhouse gas emitters which could now lead to it divesting from investments in oil steel or cement multinationals in addition to not investing in nuclear weapons landmines or tobacco.
Norways wealth fund is reviewing its investments policy including divesting from oil steel and cement businesses
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The wealth fund has sought clarification of investment policy direction from Norways government. It has already decided to divest out of companies solely dedicated to oil and gas production and exploration as well as divest from companies that derive 30 percent or more of its revenues from thermal coal.
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