Digital wealth management: ESG on the rise Digital wealth management: ESG on the rise Digital wealth management: ESG on the rise

Digital wealth management: ESG on the rise

Thought Starters 4 minutes to read

Saxo Markets

Summary:  The correlation between sustainable investing and financial performance is often being questioned. However, studies by S&P Global suggest that the consideration of ESG factors actually enhances the long-term financial performance.


 Learn more about our managed ESG portfolio, Brown Advisory Ethical Selection.  

The foundations of ESG investing 
Environmental, social and governance (ESG) criteria constitute a set of standards for a company's operations that determine its sustainability and ethical impact. One way to analyse whether a company is meeting these criteria is to work out the company's total exposure to material ESG factors, such as natural resource management, labour practices and accounting standards. The total exposure is split up into manageable and unmanageable risk, where the company's policies, practices and programmes' mitigation of the manageable risk determines the level of ESG adherence. 

The growing interest in ESG
Interest in ESG has grown rapidly in recent years, with investors increasingly integrating ESG factors in their investment strategies. According to a survey by Morgan Stanley, about 84% of the requested asset owners are considering ESG factors when evaluating investment opportunities. Further, the same survey revealed a preference for stocks among the asset owners when picking quality sustainable investments.

Source: Morgan Stanley, 2018

Although investors have their own individual objectives, the increasing interest in ESG investments seems to stem from two major objectives: values and investment performance.

Values can be split into two factors, internal and external, where the former includes ethical, religious and political beliefs, while impact on one's surroundings constitutes the external factor. Investors filtering on their personal values are typically trying to exclude controversial business, including tobacco, weapons and alcohol. In comparison, investors focusing on external values are filtering out investments based on environmental and social variables.

The second major objective for investors to integrate ESG factors in their investment strategies is investment performance. Studies, like this analysis by S&P Global, highlight links between ESG and financial performance, fuelled by underlying factors such as improved corporate reputation, reduced operating costs and new market opportunities. Furthermore, approximately 90% of US consumers would buy a product based on the company's degree of ESG implementation, indicating a further potential upside in company performance.

A convenient approach to ESG investing

Saxo’s managed ESG portfolio, the Brown Advisory Ethical Selection, is a ready-made portfolio of 30 to 40 stocks chosen for their investment potential and adherence to ESG practices. The most favoured companies not only follow ESG practices, but embrace them proactively for business success. More specifically, Brown’s ethical selection strategy is governed by fundamental research and ESG filters, with companies chosen for their fundamentals also tested against several ESG screens.

Read more about Brown Advisory Ethical Selection here.

The Brown Advisory Ethical Selection stock portfolio is assessed as a high-risk portfolio given its concentration in ESG-filtered equities.

The portfolio-risk partially stems from asset-specific risk, as the portfolio invests in selected companies and not overall indices like for ETF portfolios. Factors influencing the value of the underlying equities in the portfolio include political and economic news, daily stock market movements, significant corporate events and company earnings. Moreover, the portfolio-risk is further increased given its sector concentration, filtering out equities that do not meet the defined ESG criteria. Hence, the portfolio is more sensitive to localised economic, market, political or regulatory events.

As a reference, investing into stocks is considered high risk, and during a bad period the stock market value could decline by more than 20%, based on historic events.

SaxoSelect: our low-cost digital wealth management service 

Investing in SaxoSelect managed portfolios not only guarantees you a convenient holding period but also top-quality investment management. Our stock-picking process is based on rigorous research and time-tested investment principles from leading experts, which, combined with our industry-leading technology, gives you a unique investment opportunity.    

Read more about SaxoSelect here

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.