Responsible Investing and Active Ownership

In this Whitepaper we consider the different approaches to ESG taken in the investment industry, the evidence of the impact of adopting ESG criteria on investment performance and the approaches to ESG investing offered by Invesco.

Jun 12, 2017 | Bonnie Saynay & Dr. Henning Stein

The consideration of environmental, social and governance (ESG) issues in investing has grown in importance and developed in its implementation in recent years. Different terms, often used interchangeably, are used to express the various approaches: these include responsible investing (the term preferred at Invesco) and sustainable investing.

In Europe and Australia/New Zealand more than half of all professionally managed assets take into account such considerations; in North America the proportion is lower but rising quickly.1 ESG considerations cover a wide range of factors: from air pollution to audit committee structures; from biodiversity to bribery; from child labour to climate change.

In the past, ESG issues typically resulted in the exclusion of certain industrial sectors (in armaments, tobacco and alcohol companies, for example) or certain countries from investment portfolios. While such ‘exclusion’ techniques are still widely used, the incorporation of ESG considerations in investment decisions is now done in a variety of ways.

The hallmark of Invesco’s ESG approach is responsible investing and active ownership. In our function as fiduciaries for our clients, we see our role as business owners rather than shareholders. We believe that active ownership is the singular most effective mechanism to drive responsible investment and strong investment stewardship.

That active ownership means that we take a long-term, high quality, high conviction investment approach. This involves purposeful engagement with corporates and proxy voting. The key inputs to this process include our ongoing engagement with corporates, their boards and advisory firms; our on-site due diligence; and our own internal governance committees.