An integrative approach to responsible investing is needed

Many ESG frameworks assess environmental, social, and governance factors in isolation, often missing how these areas interact. For example, cutting carbon emissions through renewables can unintentionally harm communities reliant on fossil fuel jobs or involve problematic labour practices in supply chains. Likewise, the social benefits of certain projects, like mining operations boosting local incomes and education, may be overlooked if they fall outside narrow ESG metrics.

First Sentier Investors advocates for a more holistic approach to responsible investing — one that considers both synergies and trade-offs. “In this way investors can identify opportunities that might otherwise be missed. Similarly, investors can help mitigate the risks of trade‑offs that might otherwise erode long-term value and sustainability,” a recent paper by the asset manager states. While trade-offs can’t always be avoided, they should be clearly understood and addressed wherever possible, First Sentier Investors opine.

Access the full paper here.