At Van Lanschot Kempen Investment Management we strongly belief that ESG is an essential part of the ever-evolving set of tools in selecting the most resilient and strongest risk adjusted investments in the long-term. ESG is made up of three distinct concepts, and although they all depend on each other, they do have differences. There has been a general lack of clarity, structure and direction on evaluating the Social policies of companies as a factor of future return generation and engagement within the investment management industry.
When we mention and analyse “ESG” within an investment environment, we believe strongly that it is wrong to ignore the ‘’S’’, the Social component as it has long term financial materiality. In this short paper we explore this important and often overlooked task in detail. S is an integral part of the “ESG” acronym. Within the three components of ESG, it is fair to say that, whilst environmental and governance aspects are progressively well covered, the S-social still largely remains in the background, from a global standpoint. The inclusion of the S component is very important due to its financial materiality, but is also very challenging, as it attempts to incorporate market practices into what traditionally has been considered a more political area.