Investors’ long-term success may increasingly depend not just on the narrow financial performance of the companies whose shares they buy, but on how well they manage the ethical questions that will ultimately shape the outcomes for those companies.
While many asset owners look on responsible investing as an ethical obligation, the growing consensus is that it is also good business.
This view casts responsibility as a question of risk management. If you invest only in businesses with good human rights practices, engagement with local communities, clear accountability through the supply chain and clarity about exposure to resource scarcity, you are less likely to be caught out by an unforeseen problem such as protests over water rights or litigation following an oil spill, such as BP’s Deepwater Horizon debacle in the Gulf of Mexico.