What is ESG?
Environmental, social and governance (ESG) investing is all the rage. When Dana Investments started our first ESG fund at the turn of the century, the total market size for ESG strategies was only $2 trillion. At the start of 2018, ESG strategies accounted for an astounding $12 trillion in investable assets! However, despite this robust demand, an air of ambiguity still hovers over the ESG marketplace. Investors are hearing about these funds and clearly want to know more.
ESG, SRI (socially responsible investing), RI (responsible investing) and faith-based funds all fall under the umbrella of impact investments. The mandate for these funds is to consider the impact that corporate behavior has on shareholders, stakeholders and society. Impact investors not only want their returns, they want their returns to matter.
In addition to using traditional fundamental analysis, impact funds also screen their investments for a variety of factors such as a corporation’s environmental impact, workforce diversity, human rights policies, executive compensation and overall transparency. Impact funds can be broad based or specifically tailored to the factors that matter most to the investor. For example, at Dana, in addition to our Social and Carbon-Sensitive ESG strategies, we manage a Catholic ESG strategy that incorporates the US Conference of Catholic Bishop’s guidance in the investment screening process.
ESG investing is a means by which investors can support the issues and causes that matter to them. It enables investors to potentially make a return and an impact with their investment dollars.
Interested in learning more about ESG? Download our Free Guidebook below.
NOTE: This is the first of a three-part blog series on ESG investing. Come back for Part 2 on How ESG investments are selected or sign up here to be notified when our insights are released.