By Lynda Kenny
Head of Compliance and Risk | CSC Global Financial Markets
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The environmental, social, and governance strategy (ESG) was borne from socially responsible investment (SRI), and trends suggest an even broader evolution in play under the mantel of sustainable investment. Once a niche investment strategy, ESG has grown into a global asset space viewed by asset owners as relevant to all investment decisions.

Execution is key

Benjamin Franklin espoused, “well done is better than well said,” and this is a core sentiment embedded within asset owners’ and investors’ expectations regarding sustainable investment and the aspects within ESG. No longer is it sufficient for companies to simply have policies and procedures on sustainable investment. Rather, it’s expected that they play an active role in the firm’s business as usual operations.

Increasingly, clients and investors are investigating the ESG approach relative to their network of supply chains, vendors, and clients. The understanding is that companies can successfully promote the ESG agenda and drive positive change by engaging with similar-minded partners.

Higher returns and better outcomes

Ultimately, sustainable investment is about improving investment outcomes, achieving better returns, and lowering risk. Investment philosophies have matured from exclusionary screening—such as weapons and tobacco investments—based on ESG criteria, to a best-in-class screening among investments with perceived positive ESG performance. This also includes thematic investing in sectors that deliver a positive impact on environmental or societal matters, including renewable energies, green technology, micro-financing, and sustainable agriculture.

The development of investment models is driven to better fit investors’ concerns, as responsible investors are increasingly demanding sustainable corporate practices and greater stewardship from asset managers. ESG is not viewed as lowering the monetary return but rather aligning to the fiduciary duty of seeking the best return for investors. It increases the positivity in the long run. The combination of ethical and monetary factors allows the natural growth of ESG to become known under the sustainable investment umbrella.

Short- and long-term time horizons

ESG is increasingly viewed as a separate risk measure inclusive of reputational risk. The expectation is you manage what you measure and this applies equally to factors within ESG. Time horizon is an important measurement. However, depending on which part of the ESG platform is being considered, the “E” typically has a longer-term time horizon whereas the “S” and “G” are measurable in a shorter time period.  

While climate sustainability and societal inclusion, diversity, and engagement are typically seen as core components of investment considerations within ESG, the “G” is also an important element within the sustainable investment strategy. Strong governance frameworks and practices allow for secure data controls by way of cyber security and data resilience. Ensuring the integrity of good business practices and quality of the business structure and approach to sustainable investment empowers the realization that short-term output is not more important than longer-term goals. The longer-term goals are realized by the decisions made today. This applies equally to all areas of ESG. This is further supported by international, European, and national regulatory initiatives and guidance in this area.

It’s clear the emphasis on the advancement and integration of sustainable investment is becoming more embedded into everyday investment decisions by both asset owners and investors as well as regulators and supervisory authorities. Given the current global pandemic and social unrest, the holistic approach towards investment becomes all the more critical. The future of sustainable investment is being decided today.

CSC’s commitment to ESG

ESG is a critical component of CSC’s corporate mission, as we strive to leave our people, partners, customers, and communities better off tomorrow than they are today. Below are just a few examples of how the ESG principles are embedded in our day to day business activities.

Environmental

CSC’s headquarters was planned and built around environmentally-friendly practices — including green roofs, the planting of over 500 trees and the creation of a four-acre native vegetation meadow to attract local wildlife and insects, control storm water runoff, and rainwater collection. Additionally, our buildings include high-performance glazing and daylight harvesting with programmable LED lighting.

Social

Diversity and inclusivity are part of the CSC culture, and our organisation boasts a rich mosaic of backgrounds, experiences, knowledge, and perspectives that we rely upon to help steer our company’s long-term vision and planning.

We also have a strong history of giving back to the community by supporting social initiatives through charitable contributions and employee volunteer hours across our geographic footprint. We have sponsored more than 150 causes worldwide and have dedicated thousands of hours to help our communities.

Governance

Governance by way of IT cyber security and data security is a priority focus for CSC. This is managed with robust due diligence vendor risk assessment and strong vetting processes—as well as continued, required security education for all employees.

Experience matters

CSC Global Financial Markets is a specialized administrative provider who offers a globally integrated service―positioned across key financial centers―for private equity, real estate, private debt, venture capital, and other fund strategies. Learn More!

Examining ESG’s Evolution and Implications in Private Equity