When investing ethically, you will want your money to support companies that reflect your values as well as your financial goals. Environmental, Social and Governance (ESG) investing can help with this. It gives you a broader view of how companies behave, how they manage risk and how they may create long-term value.
Environmental issues often get the most attention in ethical investing, from renewable energy to climate action. However, the social and governance parts of ESG are just as important when deciding whether a company is well run, resilient and aligned with your values.
Taking a wider view can be helpful as investment risk is not usually linked to one issue alone. A company may appear strong on environmental measures, but concerns such as poor employee practices or weak leadership can still affect its reputation, resilience and long-term value.
The ’Social’ and ‘Governance’ factors
Social – This covers how companies treat their employees, suppliers, and communities. It includes labour practices, human rights, diversity and inclusion, and community engagement. Companies with strong social policies may attract and retain talent, maintain customer loyalty, and avoid costly scandals.
Governance – This focuses on how a company is run. Key considerations include board structure, executive pay, shareholder rights, corporate transparency, and ethical standards. Strong governance reduces the risk of fraud, mismanagement, and regulatory penalties – factors that directly affect shareholder returns.
Why S and G matter as much as E
If you are approaching retirement, protecting your investments from avoidable risks is just as important as seeking growth. Poor social or governance practices can lead to financial losses, reputational damage and market volatility. For example:
- Social risk – a company faces public backlash for poor labour practices, resulting in a decline in sales and stock value.
- Governance risk – A board scandal leads to leadership changes, fines and reputational damage, negatively affecting shareholders.
By incorporating Social & Governance considerations in your investment decisions, you’re protecting your portfolio against these risks whilst staying aligned with your values.
How our advice can help
At Origen Ethical Futures, we take a comprehensive approach to ethical investing. We consider the full range of environmental, social and governance (ESG) factors within our advice, while also helping clients identify investment solutions that reflect their personal values, objectives and long-term financial goals. By combining these perspectives, we can help ensure your investment decisions are well-balanced and match your values, objectives and attitude to risk.
If you are unsure whether your current investments reflect your ESG priorities, speak to your Origen Ethical Futures adviser who can review your portfolio and explore options that are aligned to what matters most to you.
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