In our view, ESG means considering the risks that arise from an issuer’s environmental, social and governance exposures. By broadening our perspective beyond financial data we seek evidence that issuers may respond effectively to unanticipated challenges and opportunities.
We demonstrate the results of this broader perspective by using MSCI’s overall ESG score to corroborate our assessment of ESG issues, and an established benchmark for comparison of investment performance.
We consider both the issuers’ exposure to risks arising from their activities, policies, and the effectiveness of the controls deployed to manage them. By combining measures of exposure and gauging the effectiveness of mitigating actions, we are able to identify those issuers that are best prepared. We believe that the challenges and opportunities that issuers face are sector-specific and therefore that the degree of an issuer’s preparedness should be assessed relative to its peers.