Risk management and ESG strategies

Environmental, social and governance issues can present material issues for companies

Time to read: 2 min

More than ever, people want to be fully informed about what they are eating — not only the calories, but whether it’s gluten-free, pesticide-free, organic or raised with growth hormones. They even want to know if the packaging is recyclable. Why? Because they’re seeking to avoid risks to their health and to the environment. In the same way, investors today are well aware that risk can come from a variety of places — and that’s helping to fuel an interest in environmental, social and governance (ESG) investing.


Finding opportunities in the ESG space

Invesco Unit Trusts uses two common ESG approaches in its new portfolio

Time to read: 3 min

In the past, investing according to your values, or anything other than financial fundamentals, was seen as a potential detriment to performance. Over time, however, investors have learned that non-financial metrics can help them better understand the risks a company faces, and may even impact that company’s stock price. Look no further than recent headlines to see how real-life examples of accounting scandals, environmental disasters or allegations of unfair labor practices can impact a company. At Invesco Unit Trusts, we believe that by avoiding companies that don’t have proper oversight or that place undue emphasis on short-term results, investors may reduce risks without having to sacrifice returns.

Environmental, social and corporate governance characteristics (ESG) are some of the most commonly cited attributes that portfolio managers may consider when evaluating the non-financial characteristics of a company. Below, we see that the MSCI USA ESG Select Index has closely tracked the S&P 500 Index over the last decade.


What is ESG, and why should investors care?

Environmental, social and governance issues can impact shareholder value

Time to read: 3 min

Shoppers looking for “healthy food” must contend with a growing number of labels: organic, low-calorie, non-GMO, all-natural and many more. What you choose depends on your personal preferences and goals. Increasingly, investors are finding themselves in a similar situation. Almost 70% of investors think it’s important to invest in companies with a positive social impact.1 But sorting through the vocabulary of responsible investing can be confusing.

As Invesco’s Global Head of Responsible Investment and Proxy Governance, much of my role involves educating and collaborating with investors, asset owners, clients and the industry to share Invesco’s view of responsible investing. In this blog, I will explain responsible investing at a high level and then highlight how we at Invesco approach this critical issue.

Explaining ESG