On the Jamaican North Coast, where all the hotels are, you’ll often see t-shirts emblazoned with the slogan “Jamaica No Problem.” In Trinidad, that laid back approach to life is taken a step further; here we say “God is a Trini,” so whatever misfortune befalls others, it won’t come near us. But even in the Caribbean, investors are prudent enough to know and be guided by ESG.
ESG refers to the environmental, social and governance criteria that are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria look at how a company performs as a steward of nature. Social criteria examine how a company manages relationships with its employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
What constitutes an acceptable set of ESG criteria? It’s subjective. Investors must do the research to find investments that match their own values. Apart from the ethical component, ESG standards are developed to help investors avoid firms at risk of suffering tangible losses as a result of their ESG practices — as evidenced by BP’s 2010 oil spill and Volkswagen’s emission scandal, both of which rocked the firms’ stock prices and resulted in billions of dollars in associated losses.
In Trinidad, the state-run petroleum operation Petrotrin has had its own environmental faux pas in the form of oil spills or leaking pipelines, which have resulted in negative headlines and hours of acerbic commentary on talk radio.
Keen attention to ESG makes all the difference to investors’ prospects. Even in a tropical paradise, where there is no long, dark winter or hordes of scurrying, unsmiling commuters, investors must take a cold look at the ESG factors affecting the operation of every company.