Inclusion is currently a hot topic in regulated investment circles where there is increased focus on impact assessment and sustainability as part of an organisation’s corporate social responsibility (CSR) policy.
Consequently, those interested in responsible investing have a wealth of different investing philosophies to choose from. One such method you may be hearing about more and more is ‘ESG investing’. It’s gaining traction as research increasingly shows that this investing method can reduce portfolio risk, generate competitive investment returns and help investors feel good about the stocks they own.
‘ESG’ stands for Environmental, Social and Governance. Investors who choose this investment strategy examine potential investments against specific criteria in these three categories. It’s a little like Socially Responsible Investing (SRI) in that it considers more than straight financial returns but, crucially, it does so in a more nuanced way.
While SRI uses filters to exclude all companies that don’t meet pre-determined value criteria, ESG gives responsible investors more flexibility over where to invest. For example, some SRI investors choose to screen out tobacco, alcohol and weapons stocks or companies they consider exert undue influence through lobbying.
Conversely, with an ESG strategy, instead of opting out of certain industry sectors, ESG investors actively opt in to companies because of impressive environmental, social and governance attributes they’ve demonstrated.
ESG investments often involve delving into a company’s material issues – factors that are “reasonably likely to impact the financial condition or operating performance of a company and therefore are most important to investors”. While issues will vary by industry sector, they are broken down into the categories of Environment; Social Capital; Human Capital; Business Model & Innovation; and Leadership & Governance. Access and affordability are among the Social Capital criteria.
The Sustainability Accounting Standards Board (SASB) has helpfully developed a Materiality Map®, broken down by business sector, as a checklist for responsible investors.
The IFC, private sector arm of the World Bank Group, recognises the importance of ensuring private enterprises in developing nations have access to markets and the financing they need to compete.
Its nine key Impact Investing principles set out the essential features of managing investments in companies or organisations that aim to have a measurable positive social or environmental impact, alongside financial returns. The IFC notes that these ‘Impact investments’ have the potential to make a significant contribution to important outcomes by addressing challenges such as global economic inequality.
Principle 3 focuses on inclusion, stating: “…This may include: improving the cost of capital, active shareholder engagement, specific financial structuring, offering innovative financing instruments, assisting with further resource mobilisation, creating long-term trusted partnerships, providing technical/market advice or capacity building to the investee, and/or helping the investee to meet higher operational standards.”
Inclusion is key
With traditional financing methods often costly and out of reach for fledgling enterprises, Cubri Services plays an important role in improving access to innovative, more affordable financing. By opening up emerging global economies and merchants to the global market through the use of bitcoin and blockchain, we enable smaller concerns in emerging markets to grow and compete internationally.
“Cubri Services equips enterprises in emerging economies to participate in the global marketplace”
Demonstrating our values in action, Cubri Services supports Academia Santa Caterina, a private start-up dedicated to the development of scientific research, technical and vocational education and training to achieve sustainable growth, development and investment in Angola.
Through our advisory services and by facilitating cross-border trading in cryptocurrencies, Cubri Services equips enterprises in emerging economies to participate in the global marketplace, bringing to life the key CSR principle of inclusion.