Responsible investment is the approach to investing that takes into account a broader set of risks and impacts: environmental, social, and governance (ESG).
ESG risks are interlinked with each other and the bottom line. Risks to the environment can impact a company's reputation and its Social License to Operate, thereby introducing operational hurdles and governance impacts, such as regulatory burden and encumbering fines. These events, in turn, can put pressure on the company's stock price and increase the cost of financing, further adding to market and financial risks.
Companies that take an active and thoughtful approach to improving their ESG risk profile, lower their overall risk and become more attractive to investors and a more likely recipient of responsible investment.
Responsible investment requires accurate environmental, social, and governance data to bring clarity to both companies and their investors, so both parties can make the right strategic and tactical moves to lower the ESG risks of their operations and portfolios respectively, while also improving net positive impact.