ESG and Responsible Investors: Positive Trends Built on Solid Market Infrastructure

Sep 19, 2022 11:10 AM ET

ESG and Responsible Investors: Positive Trends Built on Solid Market Infrastruc…

by John Streur, CEO of Calvert Research and Management

As we look forward to the next 30 years, we believe that capital markets are on the precipice of an increase in the impact of corporate environmental, social and governance (ESG) performance on security prices. We expect a corresponding acceleration of capital deployed to solve the environmental challenges we face today, such as excessive greenhouse gas (GHG) emissions and plastic pollution. We also expect substantial improvement in corporate diversity, equity and inclusion performance.

At this moment, with war in Ukraine, the pandemic still raging globally and inflation hurting the poor the hardest, it may seem hard to accept an optimistic outlook for the future. However, with independent innovators like GreenMoney and Calvert laying the groundwork for the past few decades, we are now seeing the infrastructure that responsible investors like us have built having a real impact on transparency and capital flows.

Let’s take a look at the market infrastructure that has been built during this period to better understand our view of the future. As long-term responsible investors, we are interested in understanding the externalities a company creates in the course of its business. However, because externalities are generally negative impacts that a company has on the environment or on people directly, and that the company often hopes to avoid having to pay for or be penalized for, they are not eager to disclose information about the specific details of these externalities. Carbon emissions, human rights violations, pollution, weak performance on diversity and unsafe products are among the innumerable other adverse impacts companies have and for which they would prefer not to be held responsible. The market infrastructure necessary to create transparency into these issues, with sufficient detail to be able to use the information in investment decisions by every single investor, is what has been built or is in the final stages of development.

Read Mr. Streur full article here -