Firms that effectively manage environmental, social and governance (ESG) issues represent lowe-risk investments, it has been claimed.
Brunno Maradei, assistant director at the Ethical Investment Research Service (EIRS), says that such companies are less liable to losses incurred through environmental and social issues.
"Companies actively managing environmental, social and governance issues should be lower-risk investments - if not because of the future liabilities they avoid related to environmental and social issues such as boycotts and legal damages or indeed the income they obtain from opportunities they explore in that regard then because good management of ESG issues is closely correlated with good overall business management practice, and better managed companies tend to provide more stable returns," Mr Maradei explained.
And companies strong on ESG also tend to have well-maintained overall business management practices - meaning their chances of providing investors with stable returns are increased, according to the assistant director.
"We have witnessed consistent improvements in corporate disclosure of ESG issues and in the quality of companies' risk management procedures to deal with the ESG risks and opportunities they face," he said.
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