A More Social Responsible Way of Investing

Updated: Nov 10

We continue our research on ESG and today we will focus on the Social aspects of ‘ESG’ investing. Sustainable investing implies how companies and businesses provide a safe working environment for its employees, suppliers, customers and in communities where it operates. The social aspects include the company’s strengths and weaknesses in dealing with social trends, labor, and political views, while minimizing social issues and having a positive impact on the market.

Social factors can affect a company’s long-term and short-term financial performance. Sustainable investors will try to minimize risk that societal factors create in order to boost portfolio returns. Social issues such as health and safety, human rights, labor rights, equality, and geopolitical concerns reflect on the company’s behavior and action towards them. Other issues like labor issues also fall into this category, since the impact of labor disputes have an indirect result on economic trends. Social responsibility, consumer loyalty and trust can help customers perceive companies as a positive force in society and for all other stakeholders.

According to the article, What is the "S" in ESG? "the impact of labor disputes or challenges on a business are obvious, such as striking auto workers. As American retailers have been spending more on seasonal workers in 2019 because unemployment is low, S&P Global Market Intelligence reported in August that Kohl’s hired its seasonal workers two months earlier than usual because of the tightening labor market." Indirect factors like the example described above can be difficult to consider, but is essential in the issues and trends of ESG investing.

Since social responsibility and company ethics are becoming critical investment metrics, supporting decisions while investing in the ESG strategy, can help protect investments during the long-term. Companies with high social standards can react more intensely to economic weaknesses. The company’s business relationships and policies are an important guide as it informs the public about their values, goals, and risks of a company. Prioritizing social factors can ensure that the companies are having a positive effect on their values and while also gaining revenue.

"What is the "S" in ESG." S&P Global, 24 February 2020

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