ESG. As easy as ABC

A rise in consumers demanding responsible behaviour from companies and regulators focusing on sustainability has boosted the popularity of ESG assets.

By 2025, it’s estimated that more than a third of total global assets under management will be ESG assets - that equates to a whopping $53 trillion - and our ESG portfolio range includes a number of ESG funds that adhere to our core investing principles.

But what is ESG?

ESG is the process of considering Environmental, Social, and Governance factors when making investment decisions. Considerations widely accepted by financial services as laid out by the CFA Institute include:

  • Environmental: climate change and carbon emissions, air and water pollution, energy efficiency
  • Social: customer satisfaction, data protection and privacy, gender diversity, employee engagement
  • Governance: standards for running a company such as board composition and political contributions

It’s important to note that this list (which you can read in full in our ESG brochure) isn’t definitive.

What qualifies as an ESG investment?

There’s no clear-cut answer. With so much subjectivity involved, what one investor regards as an ESG asset might not qualify in the eyes of a different investor.

Plus there are other consequences financial planners must consider when assessing the right approach for clients. Cost is, of course, a huge factor.

Our market survey found that the average AMC for an ESG Model Portfolio Service came in at 0.4% with underlying fund charges (OCF) of 0.7%. When you consider that a market portfolio can be achieved for about 0.23% all-in, it’s crucial to ensure that additional costs incurred to serve ESG preferences are justified to meet the investor’s goals.

Betafolio and ESG

Our pragmatic approach to ESG is guided by a hundred years of empirical data, decades of academic research by renowned economists, and the practices of leading institutional investors.

We place greater emphasis on companies that adhere to higher sustainability, social and ethical standards while maintaining our low cost, buy-and-hold and globally diversified approach, that has been shown to serve investors well over the long term.

The ESG funds in our portfolio range satisfy our requirement for rigorous investment processes achieving ESG credentials, reasonable costs, and strong diversification across both fixed income and equity.

Want to know more about ESG?

Curious if ESG preferences reduce investment returns? Does ESG investing mean less diversification? (Spoiler: Not for Betafolio ESG). To discover the answers, download our free ESG guide here.

Betafolio Limited is authorised and regulated by the Financial Conduct Authority. FCA No. 840807. Past performance is no guarantee of future return. The value of investments and the income from them can go down as well as up. You may get back less than you invest. Transaction costs, taxes and inflation reduce investment returns.