ESG Mutual Fund- Looking Beyond The Annual Reports

Investing in good corporates is intuitively appealing. ESG Investing is buying sustainable businesses that are leaders in their industry when it comes to caring about their people, the planet, and their company’s purpose and mission reflect that distinctly.

ESG encourages a broader view as it encourages companies to look beyond their traditional remit. ESG scores measure sustainability. Companies are evaluated on non-financial criteria. ESG factors cover a wide spectrum of issues that traditionally are not part of financial analysis, yet may have financial relevance. This might include how corporations respond to climate change, how good they are with water management, how effective their health and safety policies are in the protection against accidents, how they manage their supply chains, how they treat their workers and whether they have a corporate culture that builds trust and fosters innovation.

ESG investing is based on the assumption that ESG factors have financial relevance. For the average investor, spotting ESG risk can be challenging. ESG factors may not be evident in financial statements. Some of this information may be found in annual reports or separate corporate social responsibility reports corporations produce. More companies are also providing voluntary disclosure through organizations such as the Global Reporting Initiative or the Carbon Disclosure Project. Investors need to familiarize themselves with the potential risks within a company and stay on top of the news about their investments.

High E score – can indicate that a company is less exposed to significant risk due to environmental issues.

High S score – can reflect a better ability to attract and retain skilled workers, to maintain consumer loyalty and avoid product liability issues.

High G score – indicates a well-run company with strong governance and high-level risk controls.

Fundamental investors typically agree that a strong corporate culture is a pre-requisite for a sustainable “value creation” and that this may fall across an “S” or “G” dimension. There is strong research evidence of ESG investing delivering good returns since companies with strong sustainability scores demonstrate better operational performance and are less risky. Claims that you have to surrender returns to engage in sustainable and impact investing are flawed. Far from harming returns, compelling evidence suggests it often boosts the risk-adjusted rate of return.

ESG criteria have broadened the way participants in the ecosystem think and behave. For e.g.: On the social side, companies with strong relationships with stakeholders including employees, suppliers, communities and investors; benefit from a strong reputation and potentially more business. Since a rising share of a company’s valuation is tied to intangible assets such as brand reputation, environmental and social performance is more material than ever.

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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