Responsible Investing

Stock selection in a climate investing strategy takes more than just avoiding companies exposed to global warming risks.

Water scarcity is no longer just a problem for developing countries in desert climes. As demand for water solutions grows, equity investors will find opportunities in companies that help quench the thirst of parched communities around the world with innovative solutions.

Social issues are perhaps the most difficult to research and least understood by investors with an environmental, social and governance (ESG) focus. But the risks and opportunities they represent are growing, and investors need a way to step up to the challenge.

Diversification has long been the calling card of an effective long-term strategy. But with climate change a growing factor in portfolio risk, global leaders contend that traditional asset mixes may need rethinking and expanding. We see carbon allowances as the next logical step.

Investors focusing on climate change often overlook Chinese firms. We think that’s a mistake. Chinese companies are playing an indispensable role in the global transition to a greener future—and carefully selected shares offer attractive return potential.

Awareness that modern slavery is a social evil and investment risk continues to grow, putting investors in a pivotal position to identify and root out this risk across industries.

As we wrap up National Slavery and Human Trafficking Prevention Month, we recognize that this social issue still persists around the world.

For companies of all sizes, investors should scrutinize cyber systems in place and dig deeper into the governance, resourcing and reporting on security.

When it comes to impact investing, don’t let your manager coast on reputation. Expect thoughtfulness and experience, which can make all the difference between greenwashing and meaningfully uplifting under-resourced communities.

Investors who opt for a sustainable approach are aligning themselves with some of the world’s most powerful growth trends. But this can also inhibit diversification.