Alpha Can Be Found in ESG Investing

Alpha Can Be Found in ESG Investing

«We all know that climate risks and the transition to a low-carbon economy are externalities that must be considered by investors, they must understand the risk to their portfolios and also consider the opportunities for investment if they are to act in their members’ best interest,» said Reynolds (pictured above).

«Yet despite this, as it stands today, not all investors do consider material ESG factors or climate risks. This is a a failure of fiduciary/investor duties,» she added.

Challenges to Work On

Measurement and the ability to demonstrate performance remains a challenge, according to 43 percent (39 percent in Asia) of participants in Natixis Survey. Two in five (48 percent in Asia) survey participants expressed concerns that companies may be «greenwashing» data to enhance their public image.

«If ESG investing is now a matter of course for institutional investors, who expect the incorporation of ESG factors to become standard practice for all managers over the next five years, the next step for the industry is to ensure that we regulate and monitor ESG products, for the protection of investors and their investments,» said Oliver Bilal, head of international sales and marketing at Natixis Investment Managers. 

Clear Taxonomy Needed

«We need clear taxonomy and labelling standards across the industry and across jurisdictions. Only truly active managers with high convictions can respect and integrate ESG principles,» Bilal added.

Currently, the UN-backed Principles for Responsible Investment (UNPRI) provides a voluntary ESG framework for companies and funds which investors can reference when making investment decisions relating to sustainability and governance practices.