Positive Investing Pays!
Environmental and Social Governance (ESG) has become an integral part of the investment industry, and is now part of mainstream investment management. There is increasing recognition of the risks of not taking due account of environmental and social factors. Avoiding these risks can materially enhance long-term returns.
Federated Hermes (manager of the Hermes Impact Opportunities Fund) has long been at the forefront of ESG and has recently published research that demonstrates the financial value of integrating ESG into fund management. Federated Hermes has identified the following:
Source: Hermes Investment Management, October 2018
Companies with strong corporate governance typically outperform poorly governed peers by an average of 0.24% each month. Companies with good or improving social factors outperform by 0.15% each month on average1.
There is a correlation between ESG risk and the amount that companies have to pay to borrow money: those with the lowest ESG scores tend to have to pay more, and those with the best scores pay less2.
Success in influencing companies on ESG drive outperformance. Companies undergoing positive change can generate an additional 7.1% in additional annualised returns3.
This is compelling evidence that the adoption of high standards of environmental and social standards is not just good for society, but it’s good for your financial well-being too.
The Positive Pennine Portfolios have ESG as a core principle when looking at constructing the portfolios. For a fund to be included within the Positive Pennine framework, it has to exhibit clear evidence of an ESG strategy and have an internal resource to implement this strategy.
If you are a Financial Adviser and would like more information about the range of Positive Pennine portfolios, please contact Sean Fisher on 07583 241668 or e-mail
Investors should remember that the value of investments, and the income from them, can go down as well as up. Investors may not recover what they invest. Past performance is no guarantee of future results. Any mention of specific security should not be interpreted as a solicitation to buy or sell specific security.
Positive Pennine is a trading style of Pennine Wealth Solutions LLP, which is authorised and regulated by the Financial Conduct Authority and is only available through authorised Financial Advisers
1Source: “ESG investing: a social uprising,” by Hermes Global Equities. Published by the International business of Federated Hermes in Q4 2018.
2 Sources: “Pricing ESG risk in credit markets: reinforcing our conviction,” by Mitch Reznick, CFA and Dr Michael Viehs. Published by the International business of Federated Hermes in Q4 2018. “Pricing ESG risk in sovereign credit,” by Mitch Reznick et al. Published by the International business of Federated Hermes and Beyond Ratings in Q3 2019.
3Source:.”Active Ownership,” by Elroy Dimsona, Oğuzhan Karakaşb, and Xi Lic, published in 2012. This study analysed an extensive database of corporate social responsibility engagements with US public companies over 1999–2009 addressing environmental, social, and governance concerns. Engagements are followed by a one-year abnormal return that averages +1.8%, comprising +4.4% for successful and zero for unsuccessful engagements. Past performance is not a reliable indicator of future results.