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Social Investment Strategies

At Karel Capital, Inc. social investing strategies are a part of our daily focus. Socially Responsible Investing (SRI) and Environment, Social and Governance (ESG) Investing, is oriented toward companies whose mission is more than 'just profits.' We identify those companies and funds enhancing the quality of life for their customers, employees and sustainability of our planet.

What is ESG?

ESG investing entails researching and factoring in environmental, social, and governance issues, in addition to the usual financials, when evaluating potential stocks for your portfolio.

Environmental

Carbon emissions, water usage, pollution, packaging waste, sustainable building, land usage, energy efficiency

Social

Employee health and safety, supply-chain labor standards, privacy and data security, product safety, employee developments

Governance

Business ethics, board diversity, corruption and political instability, conflicts of interest, tax transparency

E is for

environmental

The environmental component requires research into a variety of elements that illustrate a company's impact on the Earth, in both positive and negative ways. A company that's an actively good steward for the environment might be deserving of your dollars.

Environmental topics addressed include:

  • Greenhouse gas emissions targets.
  • Carbon footprint and carbon intensity (pollution and emissions).
  • Water-related issues - usage, conservation, overfishing, and waste disposal.
  • Usage of renewable - wind and solar.
  • Recycling and safe disposal practices.
  • Green products, technologies, and infrastructure.
  • Environmental benefits for employees - environmental based incentives.

Investments utilize industry-wide ESG metrics.  These include using respected sustainability standards such as Global Reporting Initiative (GRI) and Principles for Responsible Investment (PRI). 


S is for

SOCIAL

The social component consists of people-related elements including company culture and issues impacting employees, customers, consumers, and suppliers.

For information on social aspects, ESG investors should look to sustainability reports that use a respected standard like GRI or PRI, because those sustainability reports go beyond environmental issues to include information on employee, supplier, and community elements, too.

Social topics within ESG include:

  • Employee treatment, pay, benefits, and perks.
  • Employee engagement and staff turnover/churn.
  • Employee training and development.
  • Employee safety policies including sexual harassment prevention.
  • Diversity and inclusion in hiring and in awarding advancement opportunities and raises.
  • Ethical supply chain sourcing, such as conflict-free minerals and responsibly sourced food and coffee.
  • Mission or higher purpose of the business (or lack thereof).
  • Consumer friendliness, customer service responsiveness, and history of consumer protection issues including lawsuits, recalls, and regulatory penalties.
  • Public stance on social justice issues, as well as lobbying efforts.

G is for

GOVERNANCE

The corporate governance component relates to the board of directors and company oversight, as well as shareholder-friendly versus management-centric attitude. In less dry terms, ESG investors analyze how corporate managements and boards relate to different stakeholders, how the business is run, and whether the corporate incentives align with the business's success.

Governance topics include:

  • Executive compensation, bonuses, and perks.
  • Compensation tied to metrics that drive long-term business value, not short-term EPS growth.
  • Whether executives are entitled to golden parachutes (huge bonuses upon exit).
  • Diversity of the board of directors and management team.
  • Board of director composition regarding independence and interlocking directorates -- which can indicate conflicts of interest.
  • Proxy access.
  • Whether a company has a classified board of directors.
  • Whether chairman and CEO roles are separate.
  • Majority vs. plurality voting for directors.
  • Dual- or multiple-class stock structures. Transparency in communicating with shareholders, and history of lawsuits brought by shareholders.
  • Relationship and history with the U.S. Securities and Exchange Commission (SEC) and other regulatory bodies.
Corporate governance issues come up every year during proxy season, when most companies file their proxy statements announcing their annual meetings. These documents cover a variety of corporate governance topics. Shareholders vote on a variety of issues presented to them annually, such as executive compensation ("say-on-pay"), director appointments, and shareholder proposals.

Reasons to Invest

INVESTING IN THE 21ST CENTURY REQUIRES EXTENDING BEYOND TRADITIONAL INVESTMENT STRATEGIES.

Sustainable, ESG and Impact investing has grown to over $12 trillion' according to The Forum for Sustainable and Responsible Investment.

  • ESG enables investors the opportunity to align portfolios with their personal values and address real global problems.
  • Investor belief in the importance of investing in companies that exhibit corporate responsibility.
  • Increasing demand from both institutional and individual investors.

In Summary

Socially Responsible Investing (SRI), the forerunner to Environment, Social and Governance (ESG) Investing, is oriented toward companies whose mission is more than 'just profits.' We identify those companies and funds enhancing the quality of life for their customers, employees and sustainability of our planet.

ESG considers the positive actions from a company’s actions like investing into green initiatives, carbon emissions, pollution, energy efficiency, and shareholder friendly actions.

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