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bne July 2019 Cover Story I 31
The ABC of responsible investing
is now spelled ESG. Climate change and the expanding global population are changing the way investors think about long-term returns. The prospect of an environmental disaster is changing public perceptions too. The population is becoming more demanding, changing they way they shop and invest. The emphasis is shifting away from making simple profits and towards sustainability. This is a slow moving change, but one with the momentum of a glacier. Governments are being forced to react. New rules
are on the way that will demand investors not only consider the bottom line or return on investment (ROI), but also force them to take account of
a company’s environmental, social
and governance (ESG) performance.
Investors have always talked about the need for good corporate governance, but that talk is already changing to
the wider concept of ESG. Corporate governance is probably the best-defined part of ESG, but the criteria used
to measure the sustainability of an investment are still fluid.
“A number of very large investors – pension and insurance companies – have to make payments in the very long-term in the future and in that context they want people who manage money and make these investments to think about long-term issues. That led to discussion of how do you manage things like environment and government risk. And now ESG is an emerging topic of discussion here in Russia,” says Remy Briand, head of ESG at Morgan Stanley Capital International (MSCI) during
an ESG panel at the St Petersburg International Economic Forum (SPIEF) in the middle of June.
There are still no formal ESG require- ments when making investment deci- sions but funds are starting to adopt them voluntarily as they realise these changes are coming and there is no escaping them. Today ESG factors are already affecting the capital markets and investment decisions. Banks and funds are already selling, or avoiding, stocks
if they score poorly in the ESG rankings.
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