ESG -- the letters stand for environmental, social, and governance -- is an investment strategy whereby investors examine criteria within these three categories in addition to traditional financial measures. ESG
ESG — the letters stand for environmental, social, and governance — is an investment strategy whereby investors examine criteria within these three categories in addition to traditional financial measures. ESG is different from ethical investing or values-based investing, as ESG investors actively choose companies because of their positive ESG attributes, as opposed to excluding certain industries or companies because of their ESG liabilities.
Some argue ESG investing can help reduce risk. They find high-ESG characteristics associated with lower costs of capital, higher quality profitability, and less volatile stock prices. But ESG disclosures are largely voluntary, lack standardization and are not subject to regulatory oversight or audits. Also, others raise concerns plan fiduciaries could be sacrificing investment returns to fulfill social/political policy goals ESG may reflect.
However, a survey by State Street Global Advisors (SSGA) in November found 46 percent of institutional investors surveyed cited the need to meet their fiduciary duty as the key driver for adopting ESG principles. SSGA’s report on their survey findings therefore stressed that “[d]espite the mix of drivers pushing and pulling investors to or from ESG investing, it has clearly reached a tipping point where institutional investors cannot afford to ignore it — either for the risk that it may pose or, perhaps even more compellingly, the opportunities it presents.”
To better understand the complex issues surrounding ESG investing, join Leigh Snell, NCTR’s Director of Federal Relations; Suzanne Smetana, manager of SSGA’s global ESG Investment Strategy & Research efforts; and Ian Lanoff, head of Groom Law’s Public Plan Practice Group. Rounding out the panel will be an NCTR member system representative to discuss how, in practical terms, they have approached the challenges presented by this investment approach.
Registration is limited, be sure to register today to join in on the discussion.