The importance of integrating environment, social and governance (ESG) into the investment process is essential, not just in terms of ethical investment, but for risk management, says BNP Paribas.
The trend of incorporating ESG considerations into investment strategies is becoming more pronounced, said BNP Paribas head of investment reporting and performance, Asia-Pacific, Madhu Gayer.
“There is increasing recognition that ESG is a vital pillar of risk management, helping align investment strategies with long-term investment horizons,” said Mr Gayer.
“As such, there is increasing inclusion of ESG into the investment process, in particular through risk assessment and analysis."
Mr Gayer explained that ESG is an important investment consideration, most notably in terms of sustainability.
According to Mr Gayer, investors need to look at the E, the S, and the G components of a company in order to accurately assess the company’s long term sustainability.
While ESG investing is ethical, Mr Gayer also said, “Frankly, it’s just good practice in risk management.”
Approximately 66 per cent of superannuation fund trustees expect the role of ESG to increase in within the industry, according to a survey by BNP Paribas and the Australian Institute of Superannuation Trustees (AIST).