Portfolio managers realize the significance of ESG issues as a way to mitigate risks. The scoring system used by ESG factors help identify potential risks that could negatively impact a company, such as litigations and lawsuits, strikes and bad reputations.<\/p>\n
A good illustration of how ESG data can help identify risks is the Facebook-Cambridge Analytica scandal. Prior to the scandal, Facebook received several criticisms relating to data privacy management of users. The tipping point occurred when a whistleblower revealed that Cambridge Analytica harvested personal data from over 50 million Facebook users without their consent to interfere with the 2016 U.S. presidential election. Facebook saw 26% of users delete the app from their phones, according to a September 2018 survey by Pew Research Center. The company’s stock plunged by over 20% and had to pay $5 billion in fines to the Federal Trade Commission for privacy violations.<\/p>\n
Improved performance<\/strong><\/p>\n <\/em>Taking ESG criteria into consideration has been associated with higher returns over time. According to MorningStar Direct, more than 60% of funds that incorporate high sustainability ratings in their model, beat their respective benchmarks<\/span><\/span>\u00a0as of December 31, 2020<\/span><\/span>.<\/span><\/span>\u00a0The percentage of funds that outperformed their benchmark decreases\u00a0<\/span><\/span>incrementally<\/span><\/span>\u00a0with ESG risk category<\/span><\/span>,<\/span><\/span>\u00a0except for funds with a\u00a0<\/span><\/span>l<\/span><\/span>ow ES<\/span><\/span>G<\/span><\/span>\u00a0rating<\/span><\/span>.<\/span><\/span><\/p>\n Align<\/span><\/span>ing investment and values<\/span><\/span><\/strong><\/p>\n <\/span><\/em>Some investors also choose to add ESG factors in their portfolio selection process to fulfill a fiduciary duty and\/or values. Tobacco production, oil and gas, conventional weapons and firearms are among the sectors that are usually excluded from ESG portfolios due to their controversial nature. On the other hand, companies that exert a positive impact on stakeholders are sought-after such as electric vehicle companies and solar panel manufacturing companies.<\/span><\/p>\n <\/span><\/em><\/p>\n You can access Sustainalytics\u2019 12,000+ ESG risk ratings by subscribing to the Inovestor for Advisors platform, which now offers ESG risk ratings in addition to investment research, idea generation, model portfolio options and portfolio analytics.<\/p>\n Sustainable investing is the future. Access ESG risk ratings on 12,000+ companies worldwide today.[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/4″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][\/vc_column][vc_column centered_text=”true” column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/2″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][nectar_btn size=”small” button_style=”regular” button_color_2=”Accent-Color” icon_family=”none” url=”https:\/\/account.inovestor.com\/InoAdvisor\/en-CA\/Stock\/Esg?symbol=XNAS%3AAMZN” text=”TRY ESG ANALYTICS NOW”][\/vc_column][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/4″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":" [vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/4″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][\/vc_column][vc_column centered_text=”true” column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/2″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][nectar_btn size=”small” button_style=”regular” button_color_2=”Accent-Color” icon_family=”none” url=”https:\/\/account.inovestor.com\/InoAdvisor\/en-CA\/Stock\/Esg?symbol=XNAS%3AAMZN” text=”TRY ESG ANALYTICS NOW”][\/vc_column][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1\/4″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” […]<\/p>\n","protected":false},"author":14,"featured_media":38743,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[227],"class_list":["post-38742","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-intelligence","tag-esg"],"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/www.inovestor.com\/wp-content\/uploads\/2021\/02\/ESG-returns.png\")
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