It is, or it claims to be, changing the business world’s perspective on how capitalism should, and must work, in harmony with environmental issues at all levels to ensure climate change is at the helm when investments decisions are made.
In simple terms, the term ESG refers to the examination of a company’s environmental, social, and governance practices, and how such adherence effects the underlying performance, and the company’s progress against benchmarks. An ESG program is a form of risk management. A comprehensive list of bodies is involved in the ESG sphere, from private/corporate investors, financial institutional lenders, and government agencies, encompassing a myriad of communities, customers, employees, is looking at corporate ESG performance.
The essential mantra of ESG, expects companies to make their long term operations more sustainable for future generations. There are good reasons to meet those expectations, but before starting out, it’s important to understand what ESG is and what it means when making an investment in the financial markets.
In the financial industry, investors and lenders may rely on ESG data, including ESG established public domain scores or ratings, enabling third party observers to assess a firm’s risk exposure as well as its impact on potential future financial performance. Also geographically tied communities and customers may wish to know about a local company’s environmental and social practices to assess whether to advocate further financial investment support or to pull the plug.
Blacktower Approach to ESG and Sustainability
At Blacktower, we aim to help clients achieve their financial goals over the long term. We believe that the consideration of ESG factors forms an important consideration when providing financial advice and ensuring that clients are aware of the principal adverse impacts on sustainability factors and sustainability risks on returns are brought to the client’s attention as part of our advisory process when determining suitability of a client’s ESG preferences.
Our clients may request certain investment sectors or industries to include or avoid in our recommendations as part of our financial review.
What is Sustainability risk?
Sustainability risk is defined as an environmental, ESG event or situation that, if it occurs, could have a material adverse impact on the value of the investment.
The objective of this policy is to describe the integration of sustainability risks into our investment advisory activities. For the avoidance of doubt, this Sustainability Risk Policy does not cover the investment service of Reception and Transmission of orders (i.e., execution only).
In the same way as market risk, counterparty risk or liquidity risk, sustainability risks should be taken into consideration in any investment, such as:
• Physical risks, resulting from damage caused by extreme weather and climate events. These can be acute (due to natural events such as fires), or chronic (related to sustained higher temperatures and long-term geographic shifts such as rising sea level). These include heat, cold, drought, tropical cyclones, fires and floods.
• Social and human rights risks, negatively impacting workers and surrounding communities (forced labour and slavery, child labour, respect for indigenous peoples and their cultural heritage, the right of ownership, discrimination, freedom of association, the health and safety of persons, the decent nature of working conditions, remuneration and social protection, the right to privacy).
• Governance and other ethical risks (embargoes and sanctions, terrorism, corruption and bribery, resources appropriation, tax evasion, data protection).
• Transition risks, resulting from the development of a low-carbon economic model (regulatory and legal risks, technological risks, reputational risks or risks linked to market opportunities).
• Reputational risks are a key element of sustainability risks as market and consumer perceptions of our brand increasingly depend on our ESG initiatives and practices. Potential financial damages are an additional consequence of the occurrence of the events, developments or behaviours outlined above.
Blacktower ESG credentials is not Ephemeral but an integral part our investment ethos and if you are concerned about your ESG investment strategy please feel free to contact us to see if our ESG philosophy suits you...
More information contact Blacktower Financial Management on +351 289 355 685
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.