15 Reasons Why ESG Factors Affect Investment Risk & Return - News from PRI

2023 has been full of undeniable signs -- from the urgent effects of climate change to ongoing systemic racial injustices – that investment portfolios that ensure long-term shareholder value demand an analysis of all major financial risks and opportunities – including those related to climate change social equity.

In this blog, we share the Principles for Responsible Investment (PRI)'s compelling press coverage underscoring investor’s fiduciary obligation to consider how ESG factors affect investment risk and return.

Demand for Climate Data is Not Going Away l ESG Investor 

  • “There is no future in which investors and markets demand less climate-related disclosure from companies. The only questions on climate disclosure remaining are how quickly investors will be able to depend on these disclosures, and whether the US will write its own rules or let the rest of the world dictate to US companies.”

Biden Weighs in on the Battle for the Soul of Wall Street l Fortune 

  • “Undoubtedly, there are questions around what the best way to do ESG investing is, and we should welcome that debate. But the core facts are clear, and the question we should be asking is not whether financial firms should consider ESG issues, but rather how could they not?”

ESG Shows Free Markets are Working l The Hill

  • “ESG’s widespread usage is a sign that markets are working and that investors are meeting their fiduciary duty. For decades asset managers and asset owners around the world have sought out more information because their investment analysis and market experience led them to the conclusion that ESG factors can be material.”

ESG Is About Sustainable Returns for Investors l The Wall Street Journal 

  • “Investors increasingly recognize that ESG factors are material to their investments and that climate change exposes companies to risk. They know consumers increasingly favor sustainable products and businesses, and that the alternative to a sustainable global financial system is an unsustainable one. ESG investing is a means to an end: sustainable returns.

Letter to the editor: Equitable Social Goals l The Economist 

  • “ESG provides a framework to assess the interconnectedness of these issues in a way that better reflects policy and economic realities…No government, investor or business can consider pathways for policy reforms without considering their wider ramifications and the volatility that may result for markets. The e, s and g must be solved together.”

Despite the Backlash, ESG is Here to Stayl Business Times 

  • “Critiques of environmental, social, and governance (ESG) considerations in investing have increased significantly over recent months. This attention and pushback are, if anything, evidence of how much traction responsible investment has gained, and perhaps of a maturing of the sector. But at the same time this has understandably also raised questions among investors, and while ESG incorporation is not new, many are new to it.”

 ‘ESG’ Is About Information, Not Imposition l The Wall Street Journal

  • “The integration of environmental, social and governance (ESG) investment practices is not left-wing or right-wing. It is an apolitical practice geared toward delivering transparency so that investors can make informed decisions.”

DeSantis Signs Sweeping Anti-ESG Bill Targeting Funds, Banks l Bloomberg Law  

  • Greg Hershman, head of US policy at the Principles for Responsible Investment, and a critic of Florida’s law, said it creates “confusion” for investors who are analyzing every risk—including flood and climate risk in storm-famous Florida. “This legislation does not change the fact that investors find factors related to climate risks or corporate governance failures material to the value of their investments” Hershman, whose group represents organizations and firms that manage more than $121 trillion in assets, said in a statement. “It just undermines their freedom to consider those factors,” he said.

 Gov. DeSantis Signs Anti-ESG Bill into Law | Sun Sentinel 

  • Greg Hershman of the Principles for Responsible Investment, a United Nations-supported network of financial institutions, said in a statement Tuesday that the bill “means more confusion and less freedom for investors. “This legislation does not change the fact that investors find factors related to climate risks or corporate governance failures material to the value of their investments — it just undermines their freedom to consider those factors,” Hershman said.

Pushback Has Managers Holding ESG Credentials Close to the Vest l Pensions & Investments

  • “The whole world is talking about the anti-ESG movement in the U.S. but "it's not infecting the rest of the world," said David Atkin, London-based CEO of the United Nations-backed Principles for Responsible Investment. "Those who understand the risk will not stop doing what they believe is right," he said, adding "you can't unknow what you believe is a material risk."

How SVB Trapped Green l Financial Times 

  • “Gregory Hershman, head of US policy at the Principles for Responsible Investment, said that maybe if responsible investment were more widespread in the 2000s, someone would have seen the “house of cards” at play.  Investors are saying that they do care that their money is invested with “sustainable risks in mind,” Hershman said.

Will the US Pushback Against ESG Slow Global Progress?| IPE

  •   “Some asset managers are more mindful of the changing environment they’re operating in when it comes to activity conducted through initiatives, but ultimately this whole debate is firming up the fiduciary floor for ESG,”

What’s Behind The ESG Investment Backlash l Forbes

  • “Climate change is a real risk...an investment manager has a fiduciary duty to consider that risk.”

ESG Investor: ESG Backlash “Understandable, but Misguided” l ESG Investor

  • “I find it surprising that any responsible politician would try to regulate against free thought and analysis which would ultimately try to constrain investors from making good judgments that serve the best financial interests of beneficiaries.” “Change is the most pressing crisis facing the planet, and the transition (to clean energy) is unstoppable.”

‘Perverse’ GOP Rules Risk Alienating Big Finance: ESG Regulation l Bloomberg

  • “Taking ESG risks into account is “part of the fiduciary role” of a financial firm, said Nathan Fabian, Chief Responsible Investment Office at PRI, in an interview. “To say that they shouldn’t be thought about is a basic breach of a duty of care and diligence.” “It’s a very perverse set of outcomes potentially for those states that are actually banning, restricting, using anti-market approaches in some way, to try and protect industries that we all know have to transition.”

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