© 2024 M&T Bank and its affiliates and subsidiaries. All rights reserved.
Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC. 
M&T Bank Corporation’s European subsidiaries (Wilmington Trust (UK) Limited, Wilmington Trust (London) Limited, Wilmington Trust SP Services (London) Limited, Wilmington Trust SP Services (Dublin) Limited, Wilmington Trust SP Services (Frankfurt) GmbH and Wilmington Trust SAS) provide international corporate and institutional services.
WTIA, WFMC, WTAM, and WTIM are investment advisors registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any level of skill or training. Additional Information about WTIA, WFMC, WTAM, and WTIM is also available on the SEC's website at adviserinfo.sec.gov. 
Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.
M&T Bank  Equal Housing Lender. Bank NMLS #381076. Member FDIC. 
Investment and Insurance Products   • Are NOT Deposits  • Are NOT FDIC Insured  • Are NOT Insured By Any Federal Government Agency  • Have NO Bank Guarantee  • May Go Down In Value  
Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.

Environmental, social and corporate governance (ESG) investing, sometimes known as socially responsible investing, is increasingly drawing the attention of regulators.  As discussed below, term “ESG investing” is not tied to a precise, commonly used industry definition.  At a high-level, the term generally refers to investment strategies that look beyond pure financial metrics by taking a range of other factors, such as carbon emissions, societal impacts and workplace cultures to guide investment decisions. ESG investing is controversial because it is not always clear how ESG-themed investment strategies apply these factors.  In particular there is widespread debate over whether ESG investing properly advances investor interests or, in some cases, is being improperly used to pursue political and social agendas at the expense of long-term investment returns. We describe some of the potential challenges associated with ESG investing below.

ESG has no precise legal, or industry, definition.

The Securities and Exchange Commission has expressed concern over “greenwashing” (i.e., that some investment firms may be charging premiums for strategies that claim to be climate-friendly or otherwise socially responsible, but that may not deliver added value).  The SEC has indicated an interest in developing new, standardized disclosures concerning ESG with a view to providing investors with the means to evaluate the effectiveness of ESG approaches.

Current events, or “public mood” may influence the ESG factors that are given priority.

ESG-focused strategies sometimes shift their priorities to reflect changes in public sentiments.  For example, some ESG-themed funds have excluded defense industry issuers from their portfolios in the past. The Russian invasion of Ukraine has in some cases changed public perceptions toward American defense contractors, leading fund managers to re-think those exclusions.

ESG investment ratings can be subjective.

The Chartered Financial Analyst (CFA®) Institute is working on a common standard, as none currently exists for measuring ESG elements in the investment industry. Most investments rely on the ratings of companies with expertise in ESG metrics, and there is little consistency in scoring/rating from one scoring system to the next.

A fundamental principle of ESG investing proponents is that companies with sustainable business practices that rank high on ESG metrics will outperform over the long term. To a large extent, this fundamental principle remains unproven, and is likely to remain so until an accepted scoring system is developed.   

The Department of Labor has warned fiduciaries that they may not subordinate plan investment interests to the pursuit of social and political objectives through the use of ESG strategies. At the same time, DOL has observed in recently proposed regulations that, when properly applied, ESG factors may support prudent fiduciary investment processes. At the state and local government levels, some public pension systems have moved to prohibit the use of ESG strategies altogether.  Given the high-level of regulatory scrutiny plan fiduciaries will want to monitor developments in this area and to exercise care when deciding whether and how to use ESG factors.

If you have questions about your company's retirement plan, contact our team today.

This content is sourced by RPAG. Services provided by Wilmington Trust. N.A.

This article is for educational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.

Disclosures:

    • © 2024 M&T Bank and its affiliates and subsidiaries. All rights reserved.
    • Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC. 
    • M&T Bank Corporation’s European subsidiaries (Wilmington Trust (UK) Limited, Wilmington Trust (London) Limited, Wilmington Trust SP Services (London) Limited, Wilmington Trust SP Services (Dublin) Limited, Wilmington Trust SP Services (Frankfurt) GmbH and Wilmington Trust SAS) provide international corporate and institutional services.
    • WTIA, WFMC, WTAM, and WTIM are investment advisors registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any level of skill or training. Additional Information about WTIA, WFMC, WTAM, and WTIM is also available on the SEC's website at adviserinfo.sec.gov. 
    • Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.
    • M&T Bank  Equal Housing Lender. Bank NMLS #381076. Member FDIC. 
    • Investment and Insurance Products   • Are NOT Deposits  • Are NOT FDIC Insured  • Are NOT Insured By Any Federal Government Agency  • Have NO Bank Guarantee  • May Go Down In Value  
    • Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.

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