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3 Things About ESG Investing We Can All Agree On

ESG doesn't have to be a divisive topic.

Ben Johnson 26.06.2020

Environmental, social, and governance investing can be a divisive topic. It is charged with ideological undertones that can split a room in two. Regardless of which corner investors find themselves in, I think there is common ground among them. I believe there are three things about ESG investing that all investors can agree on.

ESG Risks Can Have a Material Financial Impact

I think all investors can agree that ESG risks can have a material financial impact on companies. Climate change can disrupt global agricultural supply chains and have an impact on the bottom lines of firms ranging from Bayer (BAYRY) to Starbucks (SBUX). The Facebook (FB) Cambridge Analytica data breach represented a violation of the social network's social contract with its users. Its share price suffered as a result of the firm's inability to protect its users' information. Failures of governance are the least controversial of ESG risks. When Wells Fargo's (WFC) branch employees opened millions of fake accounts to meet lofty cross-selling goals, there was no doubt that poor governance was to blame. That fiasco cost the firm billions and left a lasting blemish on its brand.

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About Author

Ben Johnson  Ben Johnson, CFA is the Director of Passive Fund Research with Morningstar.

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