What’s behind our award-winning ESG investment approach?
We were delighted to win the Bita Risk Award for Best ESG (environment, social and governance) Investment Strategy at the 2023 City of London Wealth Management Awards. But what exactly is CGWM’s approach to ESG investing? And why do we feel ESG is no longer just a ‘nice-to-have’ for clients, but is fast becoming a mainstay of portfolios?
What does ESG investing mean to us at CGWM?
Our philosophy is a simple one: we see ESG as a framework for investing in long-term structural change that makes the world better. To us, that means finding companies that are solving the world’s greatest sustainability challenges. We group these into two categories: those impacting the planet, and those impacting the people within it.
As a result, we invest in companies that solve the problems facing both planet and people – some of the most innovative companies in the world. This is known as impact investing. By necessity, it requires a long-term global and thematic focus, spanning multiple regions, sectors, and business ecosystems.
Where do we see the opportunity in ESG investing?
We don’t see ESG as being about what not to invest in. While there are some obvious areas that are environmentally and socially harmful, many companies are deliberately ambiguous when analysing their impact – for example, an insurance company might have a low carbon footprint itself, but insure a lot of businesses with a high carbon impact. On the surface, this would appear to be a good company to invest in for its ESG credentials, but actually does not have a positive impact on planet and people. This is known as ‘greenwashing’.*
Instead, we take a positive inclusion approach, which naturally excludes exposure to undesired sectors. By thinking more thematically about who the ‘winners’ might be as we transition towards a more sustainable economy, we are able to identify funds that we think will provide long-term opportunities for clients investing in our ESG portfolios.
It's crucial to note that ESG investing does not require sacrificing returns. On the contrary, we believe that by investing in some of the most forward-thinking companies around the globe, investors have the opportunity to access attractive long-term returns.
What does our thematic approach mean for investors?
Looking at financial markets from an ESG perspective cuts through short-term noise and allows us to focus on themes that really matter in the long run. Importantly, it means we are not constrained by geography. We go where the opportunity is rather than confining ourselves to a particular region.
Identifying specific themes, as a first step in the investment process, allows for a more useful allocation of resources. Therefore, instead of covering all regions, sectors, and individual stocks (which is very expensive and inefficient, as there are more than 53,000 listed companies worldwide), full attention can be paid to all opportunities associated with an identified, investible theme.
How do we measure our ESG portfolios?
At the end of 2022, all five of our risk-rated models were reviewed by Defaqto, an independent service that compares financial products. As part of the review process, Defaqto examined our portfolios’ performance with regard to risk, our ESG policy, our alignment to the policy, our adherence to the United Nations Sustainable Development Goals (UN SDGs) and more. These reviews are widely considered an invaluable resource to assist financial advisers in assessing ESG managed portfolio services, and act as a quality hallmark. To find out more about our past ESG performance, please get in touch.
* ‘Greenwashing’ is the process of conveying a false impression or providing misleading information to deceive consumers into believing that a company's products or services are environmentally friendly.
In case you missed it:
- How sustainable investing has been an “absolute transformation” for one of our clients
- Our latest market updates
If you would like to discuss our ESG services in more detail, please contact us.
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Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.
This is not a recommendation to invest or disinvest in any of the themes of sectors mentioned. They are included for illustrative purposes only.
The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.
The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.
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Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.
Investment involves risk and is not suitable for everyone.