ESG stands for Environmental, Social, and Governance. It is an acronym used to represent a set of standards for a company's operations that demonstrate its commitment to long-term sustainability and ethical practices. ESG criteria focus on how a company performs as a corporate citizen, including its impact on the environment, its relationships with stakeholders, and its internal governance practices. ESG criteria are used by investors to assess a company's long-term prospects and by regulators to foster corporate responsibility.
WITH A SENSE OF RESPONSABILITY
Ever since the United Nations defined its Sustainable Development Goals (SDGs), investors have become increasingly interested in investments that both contribute to realizing these goals while providing financial returns.
LFG+ZEST believes that by investing in companies that follow good ESG practices - and excluding those who don’t - invested funds can help advance the present and future state of the world.
Environmental criteria is taking a close look at what the company does (or doesn’t do) to protect the environment.
Natural resource use
Sometimes it also includes whether existing climate change trends will threaten a company’s future.
Social criteria has to do with how well the company treats people
Workforce health and safety
Governance criteria deals with the way the company runs the business.
Management compensation policy
Conflicts of interest
ESG INVESTING Q&A
In general, investing in companies and institutions that have a high ESG-rating ensures a sustainable and positive development of our environment. By integrating ESG in an investment portfolio, every investor can actively contribute to a better world for the next generation
Yes, LFG+ZEST is able to deliver an individualized, sustainable and responsible investing strategy. Flexibility is one of the pillars in our company’s philosophy, therefore we are able to coordinate, share and personalize investment guidelines and decisions, according to each of our clients’ individual values.
Because it’s a win-win strategy. First of all, in matching our clients’ demands, we feel good in contributing towards the improvement of our planet. Secondly, sooner than later, asset managers and authorities will set standards and will adopt a self-evaluation method regarding responsible investments, like it is today for performances’ certification or research independence and we want to be ready for that. But the main reason is that investing in a portfolio made of “good” or “sustainable” business models and companies will deliver a higher return and a lower risk to our clients. Higher performance occurs when there is a higher demand for these companies’ securities and “more sustainable” also means “higher value”. The increasing awareness of ESG factors within communities and public authorities will lead to incentives for good companies and higher taxes for bad companies. Lower risk is due to the lower probability of being invested in companies suffering from litigations, fines, lawsuits etc.
LFG+ZEST has access to an enormous analytical database, covering single issuers and investment vehicles. In each step of our investments selection, the environmental, social and governance behavior of a company or a government are critical factors, as are traditional fundamental analysis toolkits. In our philosophy, the basic step is excluding those players with business involvements that are not considered sustainable. The next step is the selection of those companies with a sustainable and responsible profile. Part of our investments are directed to those companies, which aim for a positive impact for our planet through long-term profitable projects.
Adopting an ESG approach in the investment process requires the use of additional human and technological resources. The relative additional costs are minimal compared to the advantages that can be extracted from the investments in the medium term, namely performance and, especially, lower risk: losses due to unexpected events, not even taken into consideration through traditional investment analysis, can be reduced massively.
The rise of ESG investing has been constant and relentless since the term was coined in 2005. Today, ESG investing is estimated at over USD 20 trillion in assets under management. Also the criteria defining the investments are constantly evolving: from simple negative only screens (e.g. no firearms, no tobacco) to more comprehensive factors involving corporate governance, quality of management, gender equality and much more.
1. ESG will continue to be a major focus for investors in the near future as they seek to align their investments with their values and ethical standards.
2. Companies will likely continue to incorporate ESG into their operations, as they strive to demonstrate their commitment to sustainability and ethical practices.
3. Governments and regulators will likely continue to introduce new rules and regulations to ensure that companies are meeting their ESG obligations.
4. ESG ratings and rankings will become increasingly important as investors use this information to make decisions about where to allocate their capital.
5. ESG will likely become an integral part of the global economy and continue to evolve to meet the needs of investors, companies and society.
Yes, LFG+ZEST is able to deliver a state-of-the-art portfolio and single investment reporting, with a frequency chosen by our clients. We can deliver a comprehensive overview of the ESG profile of the portfolio and its constituents, the business involvement analysis and a summary of the severity level of legal controversies. The report can go from a short summary to an extensive and deep analysis, according to the client’s wish. The report is a valid tool to verify the improvement in our clients’ portfolios.
Simply by contacting a LFG+ZEST relationship manager and requesting an ESG assessment of an already existing portfolio, or starting from scratch. Investor preferences and values will be discussed. The LFG+ZEST portfolio management team can provide an overview of ESG compliance and propose ways to improve the ESG profile of an already existing investment portfolio or can suggest investments for a newly-established ESG portfolio.