Responsible Investing with ESG

Responsible Investing is a more socially or ethically responsible form of investing that filters for companies and funds with high ESG (Environmental, Social, and Governance) scores. It takes ESG factors into account, and invests in companies deemed to have positive social impact relating to sustainability, diversity, representation, corporate governance, and community. It also means reducing exposure from companies whose business operations have a negative social impact such as the sale of weapons, or may profit from unsustainable environmental practices such as the use of coal or fossil fuels. 

Since Responsible Investing is an ESG-focused adaptation of our classic General Investing Portfolios, it is optimised for both performance and ESG. In other words, it provides an option to build your core wealth with ESG aligned principles, making it ideal for long-term financial goals such as saving for retirement.

ESG is short for Environment, Social, and Governance. Companies and organisations often have ESG scores, which is an evaluation of their business operations in relation to ESG criteria, as such:

The Environment criteria assess how a company handles its waste, resources, and environmental impact, such as its carbon footprint. An environmentally sustainable company is more likely to be resource-efficient and accountable for its impact to the environment, which also helps it gain public confidence. As the world pivots towards more climate-friendly policies, circular economies, and sustainable development, these companies are also more likely to thrive in the long run.

The Social criteria assess how a company interacts with its communities. A socially responsible company would be expected to treat its employees fairly, source for fair labour, maintain proper working conditions, and have diversity policies. Organisations can impact the livelihoods of whole communities and are more likely to thrive when those who come into contact with them - whether as customers or employees - are fairly treated. This has many trickle-down benefits that affect a company’s bottom line: from higher employee retention rates to strong community and industry representation.

The Governance criteria assess a company’s framework for decision-making and legal compliance. Strong governance ensures that companies distribute their resources fairly, deal appropriately with bribery or fraud, and avoid conflicts of interest at the board level. Companies with robust governance are more likely to practice fairness and transparency across the organisation and be more stable in the long term.

StashAway uses two leading ESG scoring models to screen the portfolios’ underlying funds: the MSCI ESG rating , which consists of 7 rating categories; and the Morningstar Sustainability Rating , which consists of 5 rating categories. Based on an average of the two scoring models, the Responsible Investing portfolios have high ESG scores, ranging between 3.88 and 4.14 out of a score of 5.  

Your returns are not compromised when you invest in our ESG-optimised Responsible Investing Portfolio. They are similar to our classic General Investing Portfolios, which optimise for returns, but do so using ESG aligned principles. This makes them ideal for building your core wealth, or for working towards long-term financial goals such as saving for retirement.

Global momentum has been huge for socially responsible investing recently, with assets estimated to reach US$53 trillion by 2025, a third of global AUM, according to Bloomberg. This is not only because investors have become more socially-conscious, but also because some companies with strong ESG ratings may do better in the long run by staying committed to the ‘triple bottom line’, which takes into account not just profit, but also people and the planet.

The Responsible Investing Portfolio and the General Investing Portfolio are globally diversified and optimised for long-term returns. Both portfolios have been designed to be suitable for building your core wealth or for long-term financial goals such as saving for retirement.

Compared to the General Investing Portfolio, Responsible Investing is considered more socially or ethically responsible, with a focus on ESG (Environmental, Social, and Governance) principles. It filters for companies that promote better diversity, governance, sustainability, and community.

You can create a Responsible Investing Portfolio and make a transfer between goals from your existing General Investing Portfolios. We’re working on a solution to make this switch even more seamless, so stay tuned!

Responsible Investing is an ESG-optimised (Environmental, Social, and Governance) portfolio. When you invest in this portfolio, you are supporting a broad range of companies that make a positive social and environmental impact on society, and consider factors such as sustainability, diversity, inclusion, transparency, and community as part of their business operations. In other words, it is industry-agnostic. Through this portfolio, you have the option to build your core wealth with ESG aligned principles. 

In contrast, Environment and Cleantech focuses on the environment industry specifically. It is a thematic portfolio that invests in  innovative low-carbon technologies and sustainable solutions to fight climate change, such as solar energy. The companies in this portfolio have business operations that are directly relevant to clean energy, green growth, clean water, and sustainable waste management. As with our other Thematic Portfolios, Environment and Cleantech provides an option to diversify your investments.

The ESG investing approach is still relatively new, so the risk involved is generally higher than that of a traditional fixed income market. Keeping our clients’ best interest in mind, we’ve chosen not to offer the same low level risk portfolios with a StashAway Risk Index (SRI) of 6.5, 8 or 10, until the market further matures.