ESG In The United States And Abroad
The ESG movement is global by nature and many investors are apprehensive regarding how the current global environment may affect ESG investing. Though times may be changing, we believe ESG initiatives are still important. Even in light of proposed changes, our opinion is that domestic investors continue to view ESG investing in a favorable light.
Several initiatives, however, are underway regarding ESG. Corporate disclosure guidelines and deregulation may increase the use of nuclear and fossil fuel energy. While it is always hard to predict how changes will ultimately play out in the future, we continue to believe that the future of ESG investing looks promising as it continues to experience robust support from the global financial industry and investors.
The Importance Of Disclosures
Disclosures are vital in ESG investing as they provide analytic proof to many investors that a company is actually meeting their stated or proposed goals. Global attitudes have generally shifted towards greater corporate responsibility. We believe a growing number of investors may favor greater government oversight concerning ethical standards, demonstrating that ESG investing remains important regardless of the regulatory nature of the current environment in any given country.
As we wrote in “Why ESG May Finally Gain Traction,” taking ESG factors into consideration concerning both individual and institutional portfolio decisions is not a recent occurrence; however, we believe many investors are assigning it a greater role in their decisions. Corporate disclosures remain very important for those concerned about the effects of climate change, human rights abuses and/or poor company management. Our research shows companies that show concern for non-financial disclosures have a greater chance of long term success than competitors that forego these types of initiatives.
The opinions expressed herein are those of the author and do not necessarily represent the views of Northern Trust. Northern Trust does not warrant the accuracy or completeness of information contained herein. Such information is subject to change and is not intended to influence your investment decisions.
Proposed legislative rollbacks on corporate governance and climate change initiatives have roused some concerns about the impact on ESG (environmental, social, and governance) investing. The potential changes under the current administration appear to diverge from some of the other world economies concerning these issues. We believe investors have many reasons to remain confident, however, and that it continues to be beneficial for investors concerned about ESG issues to remain diligent in the beliefs that corporate responsibility, transparency and disclosure are advantageous over the long term.
As an example of the growing global scope and importance of disclosures, Canadian regulatory agencies have shown a greater interest in corporate disclosures in recent years. Firms in Alberta must disclose how they represent women on their boards and in executive positions. We believe global ESG investors prefer transparency of this nature and regardless of the political situation in one particular country, transparency in such matters has also become a priority among many investors.