The S is an Emerging Trend in ESG

By Svetlana Borovkova, Head of Quantitative Modelling

Sustainable investing and ESG (Environmental, Social and Governance) issues in investing are currently the key investment themes. Environmental aspects of a company’s operation (the E in ESG) have attracted a lot of attention in the past few years. These aspects are well-measurable (for example, CO2 emissions of a company) and resonate well with climate change issues.

Governance issues (the G in ESG) have been studied by investors long before ESG became a trend: studies from as early as the 80s and the 90s have shown that well-governed companies are less risky, have higher credit ratings and produce higher returns.

However, the S in ESG – social aspects of a company’s strengths and weaknesses in dealing with society, workforce and politics – has so far remained a ‘poor relative’ of the E and the G.