The value of environmental, social and governance factors for foundation investments

The recent financial crisis exposed the risks that all investors, including trusts and foundations are exposed to. Any investor with a stake in the financial market has a stake in ensuring that a similar crisis is avoided in future. The crisis highlighted the significance of accountability, transparency, the consideration of ‘extra-financial’ research in investment processes, responsible ownership and long-term investing. Increasingly it is recognised that these values should be at the heart of the investment strategy of trusts and foundations. The consideration of ‘extra-financial’ factors, such as environment, social and governance (ESG) issues in investments is nothing new. A number of charities have been doing this for decades. Organisations such as the Joseph Rowntree Charitable Trust have invested in line with their charitable objectives without losing out financially. Whether or not you agree with the mission case for incorporating ESG factors, there is growing evidence that this is an astute financial decision and can be used to safeguard and enhance returns. It can help to mitigate risks and take advantage of opportunities. The United Nations Environment Programme Finance Initiative (UNEP FI) produced a comprehensive study into this issue which found that ‘ESG issues are material – there is robust evidence that ESG issues affect shareholder value in both the short and long term.’ Image: charitysri.org. > More…

Source: EIRIS Foundation