Five reasons investors should adopt an active versus passive ESG approach

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The importance of integrating ESG related risks and opportunities into investment decisions has become undeniable. The ability for companies to generate superior shareholder returns is increasingly intertwined with ESG and sustainability factors.

Consumers are increasingly voting with their feet and making purchase decisions that consider a whole host of ethical and sustainable considerations, in addition to the price and quality of a product or service. For some, that may include basing decisions on simple considerations like the ingredients that are contained within a product, while others seek a deeper understanding of a company's supply chain and operations and will only buy products or services from those companies that are reducing their environmental impact or taking measures to ensure the safety and well-being of workers within their supply chains.

Companies that focus attention on ESG factors also often have happier and more productive employees, and this has never been more important than over the past 18 months where the COVID-19 pandemic has upended the way that a large portion of the global population live and work. Appropriately addressing ESG issues can also mitigate the risk of negative regulatory actions or litigation.

Companies that do a good job managing ESG risks or are well positioned to benefit from various sustainability tailwinds, will be in a stronger position to deliver superior financial outcomes over the long term.