Days have gone where in including ESG factors to investment decisions was considered as an option. Sustainable investing has become a important aspect of investment analysis, with BlackRock, J P Morgan and many other investment firms paving the way.
“BlackRock CEO Larry Fink says within the next 5 years all investors will measure a company's impact on society, government, and the environment to determine its worth”
In our view a proper analysis should always include a view on ESG factors, as by not including material ESG items one will likely to make an incomplete assessment of the fair value of a company. Key is when integrating ESG factors into an investment analysis is to focus on materiality, i.e., factors that are likely to have a material impact on the (longer-term) sustainability of a company’s business model and its share price performance.