The Relevance of ESG Factors

Some asset managers began including ESG (environmental, social, governance) factors in their company analysis a few years back, to determine if these are relevant to the company’s performance. As an example, San Francisco-based Dodge & Cox – the manager behind the Glacier Global Stock Feeder Fund* – believes governance factors are material for every company. The asset manager invests for the long term and looks for sustainable practices in the companies it invests in. The key is to understand how decisions are made and how key risks are managed.

Environmental factors include emissions and pollution; raw material sourcing; and supply chain management.

Social factors include community relations; customer satisfaction; and safety practices.

Governance factors include board structure; management incentive structures; shareholder rights; and capital allocation.

According to a recent paper from McKinsey and the World Economic Forum, it’s clear that changing climate conditions and nature loss are closely linked. We’ve also seen an increasing commitment from the private sector to look at ways to reduce their collective carbon footprint.

Looking beyond the COVID-19 pandemic, there’s a general consensus that curbing greenhouse-gas emissions and protecting the natural environment are critical to an overall global economic recovery.

According to the World Economic Forum’s 2021 global risk report, extreme weather, climate action failure and human environmental damage are rated as the top risks, most likely to happen and with the most material impact.

Francis Marais, Head of Glacier Research, says that sustainable investing is about creating long-term sustainable value for the companies, the consumers and investors, as well as the environment. “Understandably someone drawing a retirement income is going to be more focused on higher returns, whereas a younger investor who is a lot further away from retirement is likely to be more focused on the environment,” he says. “But it doesn’t have to be a trade-off – sustainable investing can also deliver good returns.”

A New Generation of Investors Seeks Sustainable Investments

Millennials have been seen to care more about sustainability than previous generations. According to the World Economic Forum, they are twice as likely to invest in companies with ESG goals; 90% want sustainable investing as an option on their retirement plans (or 401K plans as they are known in the US); 75% believe investments can influence change; and 84% believe it can alleviate poverty.

Much has been said about the upcoming wealth transfer. Over the next two decades, baby boomers in the US will transfer at least $30 trillion in wealth to the next generation. This has vast implications for sustainable investing and for investment managers and advisers too.

The Glacier Sustainable World Enhancer

The Glacier Sustainable World Enhancer (open to investments until 19 May 2021, with more issues to follow in 2021) lets investors grow their capital while contributing to global sustainable development goals at the same time.

It is a five-year, tax-efficient, structured investment that provides the certainty of capital protection and is set up in the Glacier Vantage Plan (a sinking fund policy underwritten by Sanlam Life Insurance Limited).

The Glacier Sustainable World Enhancer caters to investors’ changing demands when it comes to investing. At the core of the Glacier Sustainable World Enhancer are the ESG factors that are essentially the solutions behind the problems facing us.