ESG investment – investing that considers environmental, social, and governance factors – has been rising in popularity for decades. It is only in the last five or 10 years, though, that it can be said to have gone mainstream.

Rising numbers of available funds, a greater appetite among consumers, and increasingly appealing returns have all helped this transition. 

High-profile figures like David Attenborough and Greta Thunberg have increased public consciousness of environmental issues. Russia’s invasion of Ukraine, meanwhile, has led to soaring oil and gas profits for companies in this sector, as well as increased scrutiny on governance issues.

It is social factors, though, that could be the main focus for ESG investors this year.

Keep reading to find out why.

Social factors are becoming increasingly important to investors

The social factors covered by ESG investing focus on how a company behaves toward its staff and the community in which it sits. 

The health, safety, and general wellbeing of staff is one area that has become increasingly important in recent years. 

The rise of Mental Health Awareness Day – and initiatives like the Football Association’s Heads Up campaign – have helped to provoke a national conversation. Back in 2020, the coronavirus pandemic shone a light on how companies treated staff, with Wetherspoons and Waterstones among those to face public scrutiny. 

Not long after the UK entered lockdown, the killing of George Floyd rocked America and the rest of the world. 

Among the wider issues brought to the fore was a more intense focus on equality, diversity, and inclusion, all areas that are covered by the social element of ESG. 

More recently, the strikes by public sector workers – including rail employees, university lecturers, and nurses – have highlighted the need for fair pay.

Relationships with community leaders might also come under scrutiny, as well as a company’s record on product safety and the use of forced or child labour at any point along a company’s production line.

A company’s credentials on ESG issues can be hard to measure, but doing so matters

Determining a company’s ESG credentials isn’t always easy. From corporate corruption undermining governance efforts to recent well-publicised examples of “greenwashing”, even those companies seen as leading the way in ESG can come unstuck.

Measuring social factors can prove equally tricky. Some aspects of a company’s social conscience can be easily measured, for example: 

• The ratio of women to men among its staff
• The percentage of racially diverse employees
• Any disparity in pay between different groups.

Other areas are harder to assess. 

Partly, this comes from differences between industries. Health and safety concerns will be different across professions, for example, and will therefore require different approaches to implementation and measurement.

Failures to correctly measure these factors (as well as environmental and governance ones) can make a huge difference to the sustainability credentials of your entire portfolio.

Sustainability matters to us at Expert Wealth

At Expert Wealth, we can help you navigate the occasionally perilous world of ESG, ensuring that your investments match your values across the whole sustainability spectrum.

Our experts understand that you want to invest sustainably while still achieving your financial goals. A focus on ESG factors is important to us too.

We have several initiatives in place as a business. These include:

• Using recycling bins throughout the office and training our team on effective recycling
• Allowing our staff to work remotely, which helps to reduce emissions
• Offsetting our carbon footprint by supporting community and global projects. 

If you haven’t already, you can read our Sustainability at Expert Wealth blog to see the work we did in 2022 and will continue to do in 2023 and beyond.

Get in touch

With decades of experience, our Chartered Financial Planners have the expertise to help you plan your retirement your way. If you have any questions, please get in touch and speak to us today.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.