Ethical investing, Environmental, Social and Governance (ESG) investing, sustainable investing, impact investing:
There are a variety of terms which are used to describe the alignment of investing with an investor’s personal values and beliefs.
The proliferation of these terms muddies the water and, put simply, they fit under the umbrella of ‘responsible investing’. Responsible investing seeks returns alongside a positive long-term impact on the society, environment and economy.
In practice, at St. James’s Place, it means that these considerations influence the decision-making process when we select fund managers so that they are well placed to manage risk and aim to generate sustainable, long term returns.
The broad variety of strategies demonstrates the ways in which fund managers aim to meet your values and objectives. The definitions below will help differentiate between the strands of responsible investing:
Ethical investing: This involves applying strict criteria to available sectors and companies seeking investment. The criteria will mean that ‘negative screens’ exclude/limit exposure to investment opportunities which are deemed unethical or socially irresponsible. The most common exclusions are armaments, fossil fuels and tobacco.
Environmental, Social and Governance (ESG) integration: This involves investing with the explicit inclusion of ESG risks and opportunities in investment analysis. These strategies will view the considerations of these factors alongside traditional metrics such as profit or volatility. In the long-term, there is the belief that integrating these factors will potentially generate more sustainable returns.
Sustainable investing: This involves fully incorporating ESG factors into the investment process and investing in companies that provide a positive contribution to sustainable trends. For examples, companies may have products or services that are solving challenges such as plastic pollution, climate change or poverty.
Impact investing: Investments that are designed to generate measurable social and environmental benefits alongside a financial return. These tend to be made in private market structures such as private equity and private debt with the view to make a positive contribution to the world.
St. James’s Place has appointed Kirsteen Morrison and David Winbourne of IMPAX asset management to run our Sustainable and Responsible Equity Fund.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.