Andrzej Pioch, Fund Manager, Asset Allocation at Legal & General Investment Management, discusses with Paul Measures, Head of Intermediary Sales, the topic of Environmental, Social and Governance (ESG). 

The three key areas of discussion in the video are:

• What is ESG investing?
• How to capture ESG in an index fund
• How to ensure that ESG investments are making a difference

Andrzej comments: ‘’ESG is all about looking at the company with a wide angled lens to better understand the context in which the company operates. ESG is not just about doing the right thing now, because companies that realise the impact that they might have on the environment today will put measures in place that will make them more resilient to climate change in the future. Likewise, companies that encourage more ethnic minorities or women to join their workforce realise the importance of cognitive diversity which in turn leads to better decision making.’’

‘’The way that investors think about the companies they invest in is shifting. They now take a wider perspective on how that company does business and what that might mean for the environment (the E in ESG), for the wider society (the S in ESG) or in terms of governance (the G in ESG).”

‘’After the signing of the Paris agreement in 2015, both investors and regulators started asking companies to disclose more data on the impact that they had on society and the environment. This resulted in the data quality and coverage improving and the data cost decreasing. For investors this meant that they could now access well diversified index funds and therefore those that track ESG indices. The indices themselves will score all the companies in a consistent fashion on a range of reliable ESG metrics and that can also be done at a much lower cost today.’’

‘’Thanks to all the innovation in the world of investments, investors can now use their money to direct their investments on a more sustainable path. This can be achieved by tilting their investment portfolios toward companies that better manage their carbon emissions (which can now be measured), source electricity from renewable sources or have a more diverse workforce.’’

You can watch the full video commentary below.  

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The Johnston Carmichael Wealth team is here to support you. If you have any questions about your investments or other financial matters, please do not hesitate to contact me, Craig Hendry, or your usual Johnston Carmichael Wealth Financial Planner.

Disclaimer: Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority.

This communication is intended to provide a general review of certain topics and its purpose is to inform but not to recommend or support any specific investment or course of action.

Figures refer to the past and past performance is not a reliable indicator of future results. The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested.

The views and opinions expressed in the video are those of Legal & General Investment Management and should not be considered to be a recommendation or solicitation to buy or sell any investments or funds mentioned.