Envestnet – ESG is Just More Information

Avatar for Matthew Carroll Atlanta Braves

Envestnet is Fully Vested in empowering advisors and financial service providers with innovative technology, solutions, and intelligence to help make financial wellness a reality for their clients through an intelligently connected economic life.

Envestnet serves more than 105,000 advisors and 6,500 companies, including 16 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs, and hundreds of FinTech companies.

What Is ESG?

ESG, or environmental, social, and governance, refers to factors companies integrate into their business strategy. This approach minimizes risk and helps them avoid reputational damage.

Integrating material sustainability considerations into investment processes is increasingly common, and it can help improve the overall investment process and increase long-term returns.

Companies can also benefit from improved resource efficiency, reducing costs and risks. For example, reducing water consumption or carbon emissions can significantly impact financial performance.

Envestnet believes in the importance of sustainable investing. It fully Vested empowers advisors, banks, brokers/dealers, and RIAs with technology that helps clients realize intelligently connected economic lives. It recently hired Ron Ransom as Group Head of ESG.

ESG Metrics

ESG metrics are a way for businesses to measure their performance against others in the same industry and geographical areas. They allow you to understand your strengths and weaknesses to improve and perform better.

However, ESG metrics are not an exact science, and they can vary depending on your company and what it does. For example, an accounting firm in Dallas may have different ESG metrics than an international mining conglomerate that operates in Africa.

Despite this, a strong ESG score can provide an opportunity to strengthen relationships with stakeholders and governments and unlock competitive value. The best approach is to focus on the pillars of ESG that are most important to your business.

ESG Reporting

ESG reporting focuses on environmental, social, and governance issues. It is a form of public disclosure that allows companies to share information on their performance around these criteria with various stakeholders, including investors and customers.

The key to ESG reporting is identifying the metrics that make sense for your company and its business model. Some metrics are universally applicable, while others can be tailored to meet specific needs and goals.

Building a strategy that works for your business is a good idea, especially now that government agencies and major institutional shareholders are pushing for deeper climate-related disclosures from companies.

A better approach for ESG reporting is to focus on a few key issues most relevant to your company’s core activities and clients and deepen your understanding of these through measurement. That way, you can see the systems governing your outcomes and impacts more clearly and determine how to direct resources to improve them.

ESG Integration

ESG integration systematically and explicitly includes ESG factors in investment analysis and decision-making. It is one of three ways to incorporate responsible investment into a fund’s strategy, alongside negative screening and thematic investing.

The most sophisticated approach is full ESG integration, in which material nonfinancial risk factors are considered throughout the investment process. This is often combined with a screening mechanism to identify potentially problematic sectors and companies.

Increasingly, investment managers are moving to an integrated approach to ESG investing. This involves incorporating material ESG issues into a company’s strategy, operations, and reporting processes.

Using this approach, companies can improve their environmental and social performance without sacrificing profit. The result is a stronger external value proposition that can help companies overcome regulatory pressure and earn government support.