Investors consider a variety of factors when determining the long-term value of a company. Public records such as annual reports and earnings statements have served as the traditional source of this information, helping investors discern the effects of macroeconomic and company-specific issues on valuations. However, with the amount of and access to information expanding significantly in recent years, more and more investors have new types of data to glean investment insights. Environmental, social, and governance (ESG) factors are one such type of information gaining in prominence and consideration among mainstream investors globally. ESG data spans a range of issues, including measures of company carbon emissions, labor and human rights policies, and corporate governance structures. Policy makers, asset owners1 , and the public at large are focused on ESG factors as a means to promote sustainable business practices and products.
Investment professionals increasingly see its potential links to company operational strength, efficiency, and management of long-term financial risks.2 Nonetheless, there is still much ambiguity as to what exactly is meant by ESG, and how investors can gather relevant ESG data and apply this information in the investment process. This ViewPoint sets out BlackRock’s views on ESG issues from the perspective of a fiduciary investor acting on behalf of asset owners, in this particular instance focusing specifically on corporate equities and debt. We define three areas in which investment managers integrate ESG factors, and our views on how ESG factors contribute to long-term value.
We move to describe the current landscape of ESG disclosure initiatives across organizations and regulatory bodies. As a result of the challenges associated with assembling and evaluating ESG information, we conclude with our recommendations for policy makers to promote the standardization of ESG metrics and disclosure requirements.
You can access Blackrocks´report here: EXPLORING ESG: A Practitioner’s Perspective