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What is sustainability investing?

Sustainability is about meeting the needs of the present generation without compromising the ability of future generations to meet theirs. We believe that responsible investment practices can have significant contribution to the development of a more sustainable financial system that benefits the wider community.

Sustainable investing balances traditional investing fundamentals with environmental, social, and governance (ESG) integration to improve long-term performance. Integrating ESG serves as a positive value-added filter to identify higher quality companies that are more resilient and better prepared to meet future challenges.

Our technological edge in ESG integration lies in augmentation with the support of Artificial Intelligence-Machine Learning (AI-ML) models, which aids in constructing ESG investment portfolios using data inputs and analyst evaluation.

As leaders in responsible investing and active owners, UOBAM leverages our regional footprint and local expertise to enhance the ESG evaluation of our companies.

 

 

We believe that Environmental, Social, and Governance (ESG) issues are financially material to a company’s long-run performance, and that they factor into performance enhancement and risk mitigation. ESG integration enables us to identify high-quality companies which are resilient, well-managed, able to grow sustainably and are likely to maintain their competitiveness in the long term. As such, we integrate Environmental, Social, and Governance (ESG) evaluation into our investment process through our sustainable investing framework that applies across all investment asset classes. 

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Investors are increasingly applying non-financial factors as part of their analysis process to identify material risks and growth opportunities.

Socially Responsible Investing (SRI) – an earlier model typically using value judgments and negative screening to decide which companies to invest in.

ESG investing – grew out of the SRI investment philosophy and as a more modern take, involves looking at finding value in companies—not just at supporting a set of values, by incorporating intangibles into traditional financial analysis.

ESG – stands for Environmental, Social, and Governance and summarise a variety of factors that are financially material to businesses, and these include (but are not limited to):

Environmental
Social
Governance
  • Climate change policies
  • Carbon footprint
  • Renewable energy
  • Waste management
  • Pollution (air, water etc.)
  • Employee treatment; training; safety
  • Gender and diversity
  • Customer satisfaction
  • Child and forced labour
  • Product safety record
  • Executive compensation, bonuses
  • Corruption
  • Transparency and disclosure
  • Board accountability

From an investment standpoint, the integration of ESG within an investment strategy helps to form the foundation of what we term as ESG Investing. In general, due to its popular adoption by asset owners and managers, ESG investing has become synonymous with sustainable investing.

Sustainable investing has evolved to encompass both SRI and ESG Integration and can also be taken to mean several other strategies including:

  • Negative Screening and Ethical Exclusions – The process of filtering out those companies that harm people or the planet. For instance, investors might exclude those related to arms, fossil fuels, tobacco and animal testing.
  • Thematic and Impact Investment – Active and deliberate investment in assets due to their business purpose fulfilling a positive impact on society or environment, as is the case for example in renewable energy, clean technology and diversity and education, or investing toward the United Nations’ Sustainable Development Goals (SDGs).
  • Responsible Investing – similar to sustainable investing in the sense of both being the allocation of capital to investments which are sustainable. In general, when one refers to one, they also mean the other.
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