Craigs Investment Partners has developed unique sustainability scores to help their clients invest in companies that align to their values of good environmental, social and governance practices.
The scoring framework has been developed in response to a growing movement for ESG investing. ESG investing is a comprehensive model that goes beyond screening and excluding companies engaged in certain business areas, such as gambling, fossil fuels or tobacco.
ESG includes a range of non-financial measures, such as business ethics, community involvement and biodiversity, to help identify sustainable and non-sustainable businesses in a more holistic manner and highlight companies that are taking active steps towards improving the sustainability of their businesses.
Craigs’ sustainability scores provide valuable information for socially responsible investors, weighing up the key issues and highlighting issues for investors to consider in an easy-to-understand manner.
“Initially, we looked at some major ESG rating providers to see what areas they look into and what their methodology was,” says Craigs Quantitative Analyst Vanessa Stevens of the development process.
“Once we started delving into the detail, we found that we didn’t want to take a quantitative approach to the scoring framework like they did. We needed to be able to weigh up multiple factors against each other and against other companies, to find an appropriate score that reflects where we think the company is at.
“This gave us a more pragmatic approach and enabled us to deliver a more client-friendly product.”
For example, when considering a company’s emissions, Craigs will look at the big picture – how emissions intensive are this company’s activities, what they are doing to lower their footprint, whether they have measurable reduction targets in place, and if the company is aware of the risks and opportunities climate change may bring.
Craigs Research Analyst Roy Davidson says with an increased public awareness of climate change, together with the impacts of COVID-19 and a number of widely publicised social movements taking place, there has been an accelerated influx of money into ESG related funds over the last few years and Craigs saw a need to help make this more accessible for their clients.
“We found that more and more clients were asking for information relating to the themes covered by our sustainability framework.
“We think it is important because alongside all the typical financial risks and opportunities you would research and analyse for a company, it is becoming more mainstream to think about these with an ‘ESG lens’ as well.”
Vanessa adds that assessing a company’s sustainability works in a multitude of ways to benefit the investor and the company they are investing in.
“It can help align investments to an investor’s set of values, but it can also help drive positive change by signaling to companies what areas stakeholders see as important, and where certain issues may need to be addressed.
“Furthermore, a company with an unsustainable business model presents additional risks over the long-term of which investors should be aware.”
After a year and a half in the making, the sustainability scores have now been launched to Craigs clients – and with a great response.
“The general feedback we have received from advisers and clients has been positive overall,” says Vanessa. “This is a big step for Craigs to begin looking at companies’ sustainability credentials.”
While experiencing strong growth in recent times, sustainable investing is only going to become more and more important in the years ahead. Craigs’ sustainability scores provide investors with the means to future-proof their portfolios while using their money to make a difference in the world.
Craigs Investment Partners is a principal sponsor of the Tauranga Chamber of Commerce’s Business Women’s Network (BWN) Speaker Series 2021, an event that champions businesses and organisations that are changing the face of business – for good. Learn more about this sold-out event here.