Get to know 7 ESG-Based Sustainable Investment Strategies
We all agree that making a decision to invest definitely requires proper planning for maximum results. In the principle of ESG investment, you are not only pursuing profit, but also pursuing sustainable business investment by paying attention to responsible investing or investments that are environmentally and socially responsible; as well as impact investing that provides positive environmental and social benefits. For this reason, you need to develop the following strategies so that your investment can generate financial returns, sustainability, and future benefits.
This strategy can be called the first step in investing and is usually called negative screening. This means that it is necessary to identify the company that will be the choice of investment. The aim is none other than to screen companies or investment objects whose businesses are considered to potentially have a negative impact on the environment or social.
2. Best in Class
After that, start developing a best in class or positive screening strategy. List the companies based on ESG, environmental, social, and governance factors. Then, choose companies that have a high ESG value.
3. ESG Integration
In this strategy, investors must analyze the company by applying ESG factors inclusively, then analyze investment or make adjustments before making investment decisions; whether the valuation offered by the company is appropriate and promising enough. ESG integration is the most rapidly growing strategy in recent times.
4. Sustainability Theme Investment
In this strategy, you only need to focus on companies in certain fields that have positive sentiments on the environment and society, such as clean energy, green technology, sustainable agriculture, or social bonds whose funds will be allocated for social projects. Therefore, this is an investment strategy that not only pursues long-term financial returns, but also provides financial services to low-income communities and has a sustainable impact on the environment.
5. Green Bond
This strategy directs investment to companies that are environmentally and socially friendly. Similar to the sustainability theme investment strategy, the only difference in the form of investment. If strategy number four is in the form of stocks, this fifth strategy is in the form of debt securities or corporate bonds related to environmental or social-based projects being carried out.
6. Impact Investment
This investment strategy focuses on positive environmental and social impacts specifically related to the terms and values of a company's social and environmental impact. In addition to providing debt funds such as the green bond strategy, this impact investment can also be in the form of shares, such as the sustainability theme investment strategy. However, if in the previous strategy the object of investment could be regulated in general terms, in this strategy the object of investment must be specifically required, measured, and evaluated for social and environmental impacts. The aim of this strategy is to acquire companies that have a real positive impact environmentally or socially.
7. Stewardship & Engagement
This strategy is in the form of direct guide and supervision by the investment manager to the company to ensure that the company runs its business activities on the right ESG basis so as not to cause losses to investors. In the context of ESG, investors believe that this ESG factor is very important for the company's performance.
By: Corporate Communications PT ABM Investama Tbk