Q: The Royal Commission has highlighted how bad culture can KO a company’s share price. How do you bring culture into your stock picking?
Environment, Social and Governance or ESG is part of the investment process rather than an asset class. We’ve recently seen through the Royal Commission into financial services the wealth destruction that can come when strong ESG principles are lacking. There is an increasing body of evidence that high ESG scores perform better than low ESG scores. Not only is about screening for ESG about managing risk and avoiding catastrophes in portfolios but it also provides better performing, more stable investments over time.
Data providers are increasing issuing ESG scores making it easier for investors to include ESG into the investment process. Here is a breakdown of Thomson Reuters ESG Score model.