How ESG relates to financial performance - Kempen Capital Management

A review of academic evidence and insight from an investor.

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... ESG investing is becoming the new normal. Signatories to the UN-supported Principles of Responsible Investment, for example, have risen six-fold to more than USD 86 trillion between 2008 and 2019. This trend is convincing investors, most forcefully through climate change, and more recently through the coronavirus outbreak, that the long-term viability of the companies in which we invest is inextricably tied to the welfare of their stakeholders. While we cannot predict the full social and financial consequences of the coronavirus pandemic at this stage, we can witness its far-reaching global economic and social impact. Kempen believes that the fall out will further accelerate a paradigm shift that changes markets from purely focusing on shareholder value towards recognising the importance of creating long-term value for all stakeholders including employees, suppliers, customers and communities. Responsible investors incorporate ESG aspects into their investment process. Asset owners (institutional & retail) and asset managers are increasingly shifting capital towards ESG investing. As this shift towards ESG investing continues, the question often asked is: What is the impact of ESG incorporation on the financial performance of investments?

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