ESG Investing - How to Navigate the Jargon

Many people would like to consider ESG factors when investing but don't know where to start, and the lack of clarity about terms doesn't help

Andy Pettit 11 November, 2020 | 3:21PM
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Escalating concerns about damage to the environment, negative publicity about working conditions at the Leicester suppliers of fashion group Boohoo, the fraud that led to the bankruptcy in June of German fintech firm Wirecard. These are examples respectively of the "E", "S" and "G" terminology that has become so prevalent in the description of investment products.

Environmental, social and governance issues like these make the general news headlines and increase public awareness of bad practice and its consequences. Asset managers have been quick to associate features of their products with improving or avoiding such issues, with some increasingly idealistic product names like the "Love our Planet and People Fund", the "Epiphany ESG Fund" and the "Vegan Fund" to name a few.

At the same time, governments need huge amounts of private investment to supplement the public funds they have earmarked to help them meet increasingly pressured national targets. Even after budgeting a quarter of its expenditure over the next decade toward climate initiatives alone, the EU estimates a funding gap in the order of €180 billion to achieve its wider sustainable goals.

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Andy Pettit  Director, Policy Research (EMEA), Morningstar