ABSTRACT
The best investors in the world have always deeply examined everything that public companies disclose. While traditional sources of data such as financial statements remain important, today there is a new trove to mine. Increasing corporate transparency and disclosure, combined with a growing research field that quantifies and measures corporate environmental, social and governance (ESG) data, provides investors with the opportunity to evaluate companies across a more complete set of information to more fully reveal corporate risks and opportunities. ESG research measures non-financial factors such as corporate governance, resource efficiency, pollution and waste management, product safety, workplace quality, supply chain management and community impact. While investors have struggled with how to use this information, a methodical and wellexecuted ESG integration strategy can reveal both corporate risks and competitive advantages that may otherwise remain invisible to portfolio managers who rely solely on traditional financial analysis. As history has shown, a common attribute of highly successful investors like Warren Buffett lies in the ability to evolve great investment ideas as new information comes to light. Today, ESG presents a clear opportunity for forward-thinking investors and portfolio managers to drive alpha and better manage risk in the twenty-first century.
