ESG investing From philanthropy to ESG
Bridging the gap between a purely return-driven investment and value-driven philanthropic donation, a new range of investment forms have been established in recent years. The most widely adopted of these are investments that pursue financial objectives while at the same time integrating environmental, social and governance (ESG) criteria.
One way of looking at the differing ESG approaches is to arrange them on a spectrum from ESG to philanthrophy (see illustration). On one side pure philanthropy – giving without expecting a return. At the other traditional investing – maximizing returns and nothing else. There are various shades of grey in between.
Sustainable investing refers to an investment strategy that considers social, environmental and governance (ESG) aspects alongside traditional valuation criteria in making investment decisions. The goal is to generate attractive financial returns, sustainably. Sustainable investments are often aligned with personal values and can provide increased transparency, risk mitigation and healthy financial returns while fostering positive social and environmental change in line with the UN's Sustainable Development Goals (SDGs).
Impact investing refers to investments which seek to generate a financial return whilst creating a measurable positive social and environmental impact. At Credit Suisse we are focussed on offering impact investments to our clients that start with intentionality of impact and target market-based returns.
When screening and constructing client portfolios, Credit Suisse collaborates with experts across the bank in the fields of sustainability, impact investing, investment research and portfolio management to apply a combination of sustainable investment approaches.
The controversial exclusion approach avoids investments in companies involved in industries that may be considered controversial from an environmental, social or governance (ESG) perspective, such as automatic weapons. The norm-based approach avoids investing in companies that are breaching international norms such as the basic principles on human rights.
The best-in-class approach identifies companies that perform well in terms of ESG criteria within a peer group by assessing their ability to successfully manage ESG issues such as CO2 emissions or labor standards. The portfolio’s sustainability profile may be further enhanced through investments that target sustainable or impactful business activities, such as energy efficiency, water conservation and improvements in education or healthcare.