The Impact of ESG Criteria on Financial Performance
By evaluating companies on the basis of strict environmental, social and governance (ESG) criteria, we derive added insight that we believe can influence the performance of their stocks either positively or negatively.
Environmental Factors
- Resource management and pollution prevention
- Reduced emissions and climate impact
- Environmental reporting/disclosure
Impact on Performance
- Avoid or minimize environmental liabilities
- Lower costs/increase profitability through energy and other efficiencies
- Reduce regulatory, litigation and reputational risk
- Indicator of well-governed company
Social Factors
- Diversity
- Health and safety
- Labor-Management relations
- Human rights
- Safety
- Product quality
- Emerging technology issues
- Community relations
- Responsible lending
- Corporate philanthropy
Workplace
Product Integrity
Community Impact
Impact on Performance
- Improved productivity and morale
- Reduce turnover and absenteeism
- Openness to new ideas and innovation
- Reduce potential for litigation and reputational risk
- Create brand loyalty
- Increased sales based on product safety and excellence
- Reduce potential for litigation
- Reduce reputational risk
- Improve brand loyalty
- Protect license to operate
Workplace
Product Integrity
Community Impact
Governance Factors
- Executive compensation
- Broad accountability
- Shareholder rights
- Reporting and disclosure
Impact on Performance
- Align interests of shareowners and management
- Avoid unpleasant financial surprises or “blow-ups”
- Reduce reputational risk
The Pax World Funds’ sustainable investing policies may inhibit the Funds’ ability to participate in certain attractive investment opportunities that otherwise would be consistent with its investment objectives and other principal investment strategies.