This key element of ESG investing could drive real change at companies and boost returns
Publishing timestamp: 2023-11-18 11:33:08
Summary
The article discusses the growing importance of the social pillar in ESG (environmental, social, and corporate governance) investing. While the environmental and governance aspects of ESG have received more attention, the social pillar has been considered more nebulous and difficult to quantify. However, there is a growing interest in understanding and analyzing the social impact of companies. The article highlights the challenges in obtaining standardized data for social themes and mentions potential solutions such as a human capital disclosure rule from the Securities and Exchange Commission. It also discusses how some investors are getting creative in assessing social performance by looking at engagement data, publicly available fines or lawsuits, and even social media posts. The article emphasizes the importance of companies taking care of their employees and communities as part of the social pillar. It also mentions the overlap between environmental and social themes and the need for an equitable carbon transition. The article notes that social themes are expected to become more important to investors globally, but there is a reverse trend in North America due to political divisiveness. It also cautions against reactionary divestment and advocates for active investor engagement to advocate for better policies. Overall, the article highlights the significance of the social pillar in ESG investing and the need for better understanding and analysis of social impact.
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