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The Elephant in the Room: The ESG Contradiction

Click the link above to read the full article.

The authors of this article are Andera Webster, Paul Smith, CFA and Kubra Koldemir.

ESG, Environmental, Social, Governance, focused investing has been around for quite some time. It has evolved and risen in popularity. In today's world, rightfully so, these factors are important. If companies forego a focus on ESG, it could hurt their long term prospects. As the article states,

"As much as we wish otherwise, the goals embedded in these initials don't always align with one another. That's why a compromise must be made. Investors, asset managers, and business have to agree on which of the three is most important."

The idea of ESG investing has always seemed logical in practice, but has not completely caught on. The article goes on to explain a few of the reasons why the authors think this is the case, and how we can shift our focus to continue to do good while achieving the required returns needed to fund our retirement savings plan, education funds, etc.

See below for a few more of our favourite quotes from the article.

"Let’s make this real: A healthy environment, a living wage, and strong workers’ rights cost money. Clients want these outcomes, but at a reasonable price. The same goes for investors. They want their money channeled to good companies that treat their workers well. And they want good investment returns. But at the end of the day, none of this is free."

"This means we have to align multiple interests. Investors, asset managers and businesses are ultimately all about people. So we have to shift our thinking away from a focus on environmental issues in isolation and towards a more holistic approach that looks at outcomes from a broad social perspective."

"Companies must tread a fine line. They must keep their business profitable in the near term while investing in going green over the long term. Sustainability is no longer a nice-to-have accessory, it is a way to future-proof their business."

"Stakeholders have to dispense with the quarterly mindset and build longer-term relationships and expectations. They need to move away from get-rich-quick investing."

The article linked and mentioned above was last posted on January 28, 2022 and written by Andera Webster, Paul Smith, CFA and Kubra Koldemir. You can see more great articles shared by the CFA Institute here.

This article was prepared by CJ Stevens and Jerry Kallitsis who are both mutual fund representatives with Investia Financial Services Inc. This is not an official publication of Investia Financial Services Inc. The views expressed in this article are those of the author alone, and are not necessarily those of Investia Financial Services Inc. The content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial or other advice. All content on this site is information of a general nature and does not address the circumstances of any particular individual or entity.