What is ESG in the Context of Sustainable Investing?
ESG is an evaluation framework for determining the sustainability of a company’s business in three areas: Environmental (E), Social (S) and Governance (G). The underlying premise of ESG is simple: Companies that fail to engage in sustainable business practices are likely to lose their value over time. Investment strategies that follow an ESG framework aim to support sustainable businesses by identifying and measuring these three key factors:
● Environment: This refers to how a company manages its impact on the environment. It may include practices like green building, climate change, clean technology, pollution, sustainable natural resources and agriculture, water use and conservation, etc.
● Social: This refers to how a company treats and manages its employees and customers, and includes such considerations as workplace safety and benefits, labor relations, diversity, human rights, community development, avoidance of harmful products, etc.
● Governance: This variable examines how management is compensated and how the board is structured. Considerations for analysis include executive compensation, political contributions, board diversity and independence, and anti-corruption policies.
The underlying premise of ESG is simple. Companies that fail to engage in sustainable business
practices are more likely to lose their value over time. Ranked below are the top 15 ESG issues
that companies face.
|Human Capital 95%||Data Privacy & Security 41%||Human Rights – Supply Chain 24%|
|Business Ethics 91%||Emissions, Effluents & Waste 36%||Community Relations 20%|
|Product Governance 77%||Resource Use 29%||Bribery & Corruption 18%|
|Carbon – Own Operations 55%||E&S Impact of Products and Services 27%||Carbon – Products and Services 16%|
|Occupational Health & Safety 46%||ESG Integration – Financials 25%||Land Use and Biodiversity 15%|
How are ESG Investment Strategies Integrated into Prio Wealth’s Investment Process?
Prio Wealth integrates ESG factors into our fundamental research process to enhance our analysis of risk, assess overall quality of management and determine the long-term sustainability of a corporation; all factors that help us create value.
● Our strategy includes measuring specific ESG risk metrics to determine how dedicated a company is to long-term sustainability.
● We utilize data from one of the world’s largest ESG research providers to assess ESG risk for
● A comprehensive ESG risk metric is automatically included in every individual company
investment report generated, whether to discuss a new idea or to review a current holding.
● Prio’s team uses a proprietary ESG dashboard for all of our clients when reviewing personal
investments. The dashboard displays up-to-date ESG data metrics for the companies in individual stock and fixed income portfolios to track progress over time.
● Our real-time updates ensure that our investment team and clients are informed about any ESG related controversies tied to individual companies owned in a portfolio.
● Prio Wealth clients can receive customized ESG reports for their portfolios anytime.
We strive to best serve our clients and their investment needs by offering an ESG integration
strategy aimed to enhance our fundamental equity and fixed income research and selection process.
Our goal is to help people live their best financial life. We guide our clients in prioritizing not
only what they’re investing in, but what they’re investing for, so they can gain clarity,
confidence and control of their financial lives. If you would like to further customize your
portfolio through the use of ESG integration, please contact us to discuss your values and how to
best align these values and areas of focus with your investments.
This document has been prepared by Prio Wealth LP (“Prio Wealth”) for informational and educational purposes only and not as investment, legal or tax advice. This document reflects the opinions of Prio Wealth and it is based on information that we believe to be reliable at the time of publication. However, Prio Wealth does not guarantee the accuracy and completeness of any sourced data. Opinions expressed herein are not intended to provide personal advice and do not take into account the unique investment objectives and financial situation of the reader. This document is not an offer to sell or a solicitation of an offer to buy any security and does not constitute a representation as to the suitability or appropriateness of any security or financial product. Prio Wealth cautions the reader that investments in securities involve risks and that past results are not indicative of any future performance.