Vision and intent
ESG is also about a vision, and that vision – a Venn diagram where environmental and social concerns marry with investors’ financial expectations and goals – is the wellbeing of both the planet and portfolios.
For Eugene Krishnan, chief financial officer of US digital health organisation Jaan Health, keeping that vision of a better future for humankind and the planet should be paramount for individuals, but it also comes down to having a clearer idea of what governance means as part of that ESG package.
He thinks it is important to hold on to that vision, with clarity and intent in corporate governance being the driving force behind effective and impactful environmental and social action. And investors large and small need to make sure that engagement is maintained to help drive positive change.
Krishnan says: “It is about asking the right questions, keeping the dialogue engaged with the right intent in mind, and there are different intents. With ESG, governance is laid on top [of a company’s purpose].
“The environment is about conserving nature’s resources so that we have a good place to live for all human beings, for a long time.
“The social constructs are about making sure that our social enterprises are set up so that they are not disadvantaging or hurting anyone.”
If companies can get all three things in place, and investors hold them to account, that vision for a better future for humanity and the planet can align with financial end goals.
Open, honest dialogue
For Tim Morris, IFA for Russell & Co, open and sensitive dialogue needs to happen with clients more widely, and there has to be as much transparency and clarity as possible in conversations.
“It’s about helping them make an informed decision. This can include approaching sensitive topics, such as what drives their beliefs.
"Generally, this makes for a more engaging and enjoyable conversation, and gives good insight into what really makes your clients tick,” he says.
But dialogue must go further than just with clients. Dunbar feels that stewardship is multidimensional, and happens within companies, in the daily interactions that take place between investors and companies they are considering investing in.
For Baillie Gifford, engaging with boards is a massive part, and admittedly resource-intensive aspect of how they gear their work in an ESG-compatible direction.
He explains: “In terms of day-to-day application, identifying good governance is about understanding what companies are doing, what is motivating their behaviour, management, timescale and capacity.
“It is also about the need to understand what companies are interested in and coping with. What is motivating them? What kind of capacity do they have?”
