What is ESG screening?
This is a good place to start. ESG screening is a method of researching and screening investment opportunities to ensure they are responsible, sustainable and fair. This is predominantly looked at across three categories: environmental, social and governance – which we will dig into in more detail within the next section.
ESG is fundamental to differentiating your depth of market knowledge from the competition, in order to uncover hidden investment gems. Innovative new products & services, strong market positioning and an early identity as a thematic leader; this is what certain ESG screening and research expertise can give firms: an advantage over other investors.
Similarly, ESG screening can uncover issues that are yet to surface. One hypothetical scenario would be that a company whose pay structure is unfairly weighted towards leadership, being uncovered through thorough ESG analysis. Screening methodology often errs towards being too simple, and some of these crucial insights can be missed.
As we’ve mentioned, ESG screening is rising in prominence, reflecting a more aware & inquisitive investment industry. Having the competitive advantage to outperform the competition and generate alpha through investments means that ESG screening, thematic investing and impact investing have never been more important.