The growing popularity of investment strategies incorporating ESG environmental, social and governance criteria is one of investment’s biggest trends

Investment June 07, 2019 (0)

More investors want their money to be invested in a sustainable way or in a way that makes a positive impact.

Investment companies in the Environmental and Infrastructure – Renewable Energy sectors achieve this by investing in environmental companies and green energy. However, it’s less well known that ESG plays an increasingly important role in the investment process for many investment companies outside these sectors.

The AIC has spoken to a number of managers from a diverse range of sectors about the role of ESG in their investment approach and how this benefits investors. Their thoughts are collated below.

ESG: its role in the investment process

Mark Mobius, Joint Manager of Mobius Investment Trust, said: “At Mobius Capital Partners we have developed a specialised active investment strategy built on working closely with portfolio companies to improve corporate governance and to provide a clear ESG pathway. We see ourselves as atypical, as we do not screen out investments or only focus on companies with high ESG ratings. We work with companies on a range of material factors, from helping to improve investor relations to suggesting enhancements to decrease water usage or lower employee turnover.”

Austin Forey, Manager of JPMorgan Emerging Markets Investment Trust, said: “ESG considerations are a natural part of our fundamental research and overall approach to investing which focuses on the longer term. It’s embedded in our process. Our fundamental analysis of any company examines what we call its economics, duration and governance. Environmental and social issues are part of the consideration of a company’s duration and its economics; a business simply isn’t thinking about its long-term future if it’s destroying the environment or abusing the community in which it operates. It will eventually pay a price for this. When considering governance, we focus on whether a company shows a proper regard for the interests of all shareholders and whether it can demonstrate proper stewardship of a a company’s assets and value over time.”

Andrew Graham, Portfolio Manager of Martin Currie Asia Unconstrained Trust, said: “Integral to our fundamental research is a focus on environmental, social and governance ESG factors, as we believe sustainable, well-managed companies make more successful long-term investments. We believe that to gain a full understanding of how sustainability factors can impact a company’s future returns they must be embedded throughout the entire investment process. Active ownership and engagement are a key part of how this analysis is carried out and will inform a continuous assessment of the investment case.”