Envestnet: ESG is Just More Information

Matthew Carroll St. Louis Cardinals

February 27, 2023


Envestnet is Fully Vested in empowering advisors and financial service providers with innovative technology, solutions, and intelligence to help their clients make financial wellness a reality.

Sustainable Investing is a crucial component of Envestnet’s Financial Wellness ecosystem; PMC’s Sustainable Investing team helps advisors integrate this investing into their practices and helps their clients find ways to generate greater social or environmental impact through investments.

What is ESG?

As more data is gathered and analysis expanded, sustainability-related information can help investors make better investment decisions. It can also help advisors identify opportunities to incorporate material sustainability factors into their portfolios and serve their clients by delivering greater financial and environmental/social returns.

The demand for sustainable investing has grown steadily in recent years, driven by societal and demographic changes, increased regulation and government focus, and growing investment conviction. ESG integration into investment processes is now more common than ever, and it can be used to improve an investment process and increase long-term returns.

Envestnet, a fully Vested(TM) company, empowers advisors and financial service providers with innovative technology, solutions, and intelligence to help clients achieve an intelligently connected economic life. More than 106,000 advisors, banks, brokers/dealers, and RIAs leverage Envestnet products and services to help clients realize financial wellness.

Why is ESG Important?

Envestnet explains that there are many reas ons why ESG is important to investors, from the rise of green energy and the need to combat climate change to a growing public awareness of the environment. Companies with sound ESG strategies have been shown to deliver higher returns on equity and lower risk while improving their performance across key areas such as supply chain management, corporate governance, and environmental compliance.

For example, research has found a strong correlation between resource efficiency and financial performance. Good ESG execution can help mitigate rising operating costs, including raw-material costs and the actual cost of water or carbon.

It can also unlock competitive value by reducing regulatory pressure and providing greater strategic freedom for a company. A stronger external value proposition can also boost a company’s relationships with its communities and governments, helping to increase growth opportunities.

In the end, however, it’s about building trust with stakeholders. The best way to do that is by proactively sharing information with investors and prioritizing it for continuous reputation and relationship building.

How Do I Measure ESG?

Companies often use ESG metrics as a way to measure how they are performing. This can help them understand their strengths and weaknesses and how they compare to others in the same industry and geographical areas.

The most common way to measure ESG is using a framework like the Global Reporting Initiative (GRI). This framework has been adopted by several companies worldwide for reporting purposes, and it has been designed to focus on environmental and social impacts.

Using a framework like this is an excellent way to ensure that your company is measuring the right things, but it is also essential to choose your metrics carefully. For example, suppose your company is a beverage maker, and you want to get the highest score possible for environmental reasons. In that case, water consumption is likely an important factor.

What Are the Benefits of ESG?

A company integrating ESG into its business strategy and operations can often better identify and manage risks. This could include risks related to climate change, supply chain disruptions, and regulatory changes.

A strong ESG commitment can help a company build brand reputation, trust, and transparency. These attributes are essential to growing a loyal customer base and driving sales growth.

In addition, a robust ESG approach may lead to increased shareholder value. Research from Harvard Business School indicates that companies that improve on material ESG issues tend to outperform their peers in the long term.

In a world where environmental, social, and governmental concerns are becoming increasingly urgent, leaders must understand how their values and financial outcomes link. Leaders should take note of five levers across the bottom and top lines that are particularly likely to be difference-makers.