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  • Writer's pictureSage Stone Advisor

Ethical Investing in 2023: A Stewardship Perspective

In recent years, ethical investing has gained significant traction as individuals and institutions recognize the power of their investments to shape the world.

This approach goes beyond the traditional focus on financial returns and takes into account environmental, social, and governance (ESG) factors. As we delve into 2023, ethical investing has evolved even further, with a growing emphasis on stewardship. This perspective considers investors as responsible stewards of capital, entrusted with the task of making sustainable and socially responsible decisions.

Active and Engaged Management

Stewardship, in the context of investing, refers to the active and engaged management of investments with a long-term perspective. It involves not only evaluating the financial performance of companies but also assessing their impact on society and the environment. Stewardship investors recognize that their decisions can influence corporate behavior, and they aim to exercise their influence to promote positive change.

Stakeholder Capitalism

One significant development in ethical investing in 2023 is the rise of stakeholder capitalism. This concept challenges the traditional shareholder-centric approach, which prioritizes maximizing shareholder value above all else. Instead, stakeholder capitalism emphasizes the importance of considering the interests of all stakeholders, including employees, customers, communities, and the environment. Stewardship investors embrace this approach by actively engaging with companies to encourage responsible practices that benefit all stakeholders.

Proxy Voting and Shareholder Activism

Another key aspect of ethical investing from a stewardship perspective is proxy voting and shareholder activism. Shareholders have the power to vote on important corporate decisions, such as electing board members and approving executive compensation. Stewardship investors leverage this power to advocate for sustainable practices, diversity and inclusion, and transparent governance. They engage with companies through dialogues, submit shareholder proposals, and vote in favor of resolutions that align with their values. By doing so, they seek to influence corporate behavior and hold companies accountable for their actions.

Technological Advancements

In 2023, technology has played a vital role in enhancing stewardship efforts in ethical investing. Artificial intelligence (AI) and big data analytics enable investors to assess the ESG performance of companies more efficiently and comprehensively. These tools provide valuable insights into a company's environmental impact, social practices, and governance structure, allowing investors to make more informed decisions. Additionally, technology facilitates greater transparency and accountability, as companies are increasingly expected to disclose relevant ESG information.

Climate Change

Climate change has emerged as a central concern for ethical investors in 2023. The urgency to address the climate crisis has prompted a shift towards sustainable investing and divestment from fossil fuels. Stewardship investors actively seek out companies that prioritize renewable energy, energy efficiency, and carbon neutrality. They encourage companies to set ambitious emissions reduction targets, improve their climate-related disclosures, and align their business models with a low-carbon future. By supporting and engaging with such companies, stewardship investors play a crucial role in the global transition to a more sustainable and resilient economy.

Furthermore, diversity, equity, and inclusion (DEI) have become focal points for ethical investors in 2023. Stewardship investors recognize the importance of diverse boards and leadership teams in driving innovation, decision-making, and long-term value creation. They advocate for increased representation of women, people of color, and other underrepresented groups in corporate positions of power. While there are cultural conflicts surrounding certain representation, there are certainly legitimate concerns being raised that cannot be overlooked. By engaging with companies on DEI matters, stewardship investors contribute to creating more inclusive and equitable societies and challenging systemic biases.

In conclusion, ethical investing in 2023 has evolved to embrace a stewardship perspective. Investors are increasingly recognizing their role as responsible stewards of capital and are actively engaging with companies to drive positive change. Stakeholder capitalism, proxy voting, and shareholder activism are key tools in their arsenal, while technology enables more comprehensive ESG analysis and greater transparency. Climate change and DEI have emerged as prominent concerns, and stewardship investors prioritize companies that align with sustainable practices.

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