In the investment world ESG, or sustainability investing, has become mainstream and a component we include in our investment process. Sustainable investing is generally understood to include any investment process that uses environmental, social, and governance criteria to evaluate investments or to assess the societal impact of investments.
Its focus is long-term, taking into consideration the interests of an extended sphere of stakeholders and the environment. Sustainable investing encourages direct investment in areas like renewable energy and green technologies as the world transitions to a low-carbon economy. It also encourages more responsible corporate behavior, which results in firms potentially reducing negative externalities, helps them attract and retain a competitive workforce, enhances their intangible value and strengthens confidence in the overall financial system.
We believe investing in ESG companies may provide investment outperformance over the long-term and we include an index focusing on ESG in our models.