“You are not Atlas carrying the world on your shoulder. It is good to remember that the planet is carrying you.”
― Vandana Shiva
By Amberjae Freeman
Here at Etho, we consider incorporating ESG factors into our investment analysis part of our duty as fiduciaries. A 2005 report showed that integrating ESG considerations into investment analysis, from a fiduciary standpoint, is “clearly permissible and is arguably required.” While conventional investment analysis focuses on value, the link between ESG considerations and financial performance is increasingly being recognized.
This perspective is also introduced in the United Nations Principles of Responsible Investment report, which concluded that investors must consider all financially material factors, regardless of their origin. Far from fiduciary duty being a barrier to considering sustainability issues, the report finds that such considerations are in alignment with prudent investment management and this belief is supported by a growing number of policymakers and regulators.
We are signatories to The 6 Principles; we consider them to be an important governance framework and use them as a guide to inform our own investment analysis and decision-making process.
The discerning investor is aware of our finite natural resources, ballooning population growth (9 billion by 2050), increased urbanization, and an aging and inadequate infrastructure. They know that we cannot continue to support the industries and companies that are not addressing their environmental, social, and governance (ESG) risks appropriately and maintain the value of our investments into perpetuity. It is the companies and projects that respond to the need for cleaner, leaner, and more sustainable products and services that will provide the best long-term shareholder value.
We have spent the planet and the future of forthcoming generations and only some of us are enjoying the proceeds without taking into account the costs to our society. Understanding this, when we account for the costs of destruction of the environment, animal species, and human society, we see that the price has been too high. It is time for a course correction in politics certainly and unquestionably in the financial markets.
The views and opinions expressed are those of the author and do not necessarily reflect those of Etho Capital, LLC.