Ted S Galpin SPP, CCP, PMP’s Post

This key element of ESG investing could drive real change at companies and boost returns

This key element of ESG investing could drive real change at companies and boost returns

This key element of ESG investing could drive real change at companies and boost returns

ESG investing has gained popularity globally with the social pillar of the environmental, social, and corporate governance framework, known as ESG, now in focus. However, the social category has been deemed the "middle child" due to difficulties in quantifying its impact. While there has been an improvement in data around human capital and diversity, some investing professionals still see a lack of standardized information that makes social themes harder to integrate, leading to varied interpretations and methods of analysis. #ESG #sustainableinvesting  

Investors shun ESG | https://lnkd.in/eanEG_qm Environmental issues are being overtaken in importance for investors by governance issues, according to research by the Association of Investment Companies (AIC). Among older (aged 65 and older) investors, 31% felt ESG is “woke”, but among the more enlightened younger generations this falls to only 13% for those aged under 45. The number of private investors who admit to considering environmental, social and governance (ESG) issues when investing has dropped for the third year in a row, with 43% of investors considering themselves “fans” of ESG investing, down from 60% in 2021, 51% in 2022 and 50% in 2023. Previous waves of the ESG Attitudes Tracker have revealed low levels of trust in ESG claims from funds, as well as concerns about greenwashing. These issues have not gone away, but there are signs that at least they are not getting worse. The number of respondents who are not convinced by ESG claims from funds dropped slightly to 61% from 63% last year. Meanwhile, two-thirds (67%) said they were concerned about greenwashing, similar to last year (68%). One investor said: “I feel like I would assume every company is greenwashing to promote themselves. And as a lay person, you wouldn't know whether they were doing what they are saying.” Investors are also more pessimistic about performance. Only 17% of respondents feel ESG investing is likely to improve performance, down from 22% last year. One investor commented: “I want to do good, and I understand ESG from that point of view, but it has to be a balance between that and getting returns. That is why we invest.”

I like to think of ESG investing as a thoughtful way to honor our clients’ values while holding companies responsible for their practices. Here’s a brief guide to understanding ESG better. https://lnkd.in/gSk_Thpj

Environmental, social, and governance (ESG), is a set of aspects, including environmental issues, social issues and corporate governance that can be considered in investing. Investing with ESG considerations is sometimes referred to as responsible investing or, in more proactive cases, impact investing. Prof.Dr.Gopal Sivakumar ,Ramakrishnan Vaidyanathan and Vinod Sankaran the ongoing sessions for the Master Black Belt Certification in Lean Six Sigma are the best sessions to gain excellent insights into all the relevant aspects. The term ESG first came to prominence in a 2004 report titled "Who Cares Wins", which was a joint initiative of financial institutions at the invitation of the United Nations (UN). By 2023, the ESG movement had grown from a UN corporate social responsibility initiative into a global phenomenon representing more than US$30 trillion in assets under management. Criticisms of ESG vary depending on viewpoint and area of focus. These areas include data quality and a lack of standardization; evolving regulation and politics; greenwashing; and variety in the definition and assessment of social good...

Sustainable and ESG Investing Environmental, Social, and Governance (ESG) investing has moved from a niche market to the mainstream. Investors are increasingly prioritizing sustainability and ethical considerations in their investment decisions. This trend is driven by: Climate Change Awareness: Investors are more conscious of the impact of their investments on the environment and are seeking out companies that prioritize sustainability. Social Responsibility: There is a growing focus on social issues such as labor practices, human rights, and community impact. Corporate Governance: Investors are demanding greater transparency and accountability from the companies they invest in. The shift towards ESG investing reflects a broader trend of aligning financial goals with personal values, contributing to long-term positive impact while seeking competitive returns.

I agree with Pedro on the view that "we need to make sure everyone is following the same framework and that ESG data is reliable." However, when I was working towards IFRS ESG certificate, I found that current industries have different frameworks that are evolving all the time. As a portfolio manager of Rotunda Found under Darden, I learned how to quantify the ESG perspective into valuation, and still on the way to go. #DardenCapitalManagement.

"Why ESG Investing Might Never Recover” is an indeterminate The Wall Street Journal headline that still has the capacity to attract clicks. Perhaps due to the limits on word count, the article leaves out much of the reason for the pull back from the #ESG frenzy of a the early 2020s. More specifically: 📈 One driver of fund creation mania and AUM increases in ESG was the promise of outsized returns. Academics published papers (see: “The Impact of Corporate Sustainability on Organizational Process and Performance” which detailed 480 basis points of outperformance for a basket of “high sustainability” vs. “low sustainability” companies and “Corporate Sustainability: First Evidence on Materiality which pointed to 600 basis points of outperformance for companies that paid heed to material ESG factors). Asset managers touted these results. In keeping with the research, actual returns for ESG funds did outperform traditional funds for a few years, in part, due to sector weightings and the likely the impact of fund flows. According to AB Bernstein, global #ESGfunds outperformed their benchmarks, for example, in both 2021 and 2022. 📉 However, in 2023 top ESG funds underperformed by more than 800bp and, as a result, since 2019, Top Global ESG funds cumulatively underperformed by over 600bp. At the same time, both of the aforementioned much quoted papers have since been contravened by replications by professor Andrew King and professor Luca Berchicci. Add, ESG fund fees of 50% greater than traditional fund fees, an inane but effective anti ESG political campaign by Republicans, recognition of the variability and subjectivity of ESG ratings and the realization of the absence of social and environmental impact of secondary market ESG equity funds….and….the bloom has come off the ESG rose. Florian Heeb Florian Berg Aswath Damodaran Alex Edmans Laura Segafredo Hortense Bioy, CFA Zhihan Ma, CFA Tariq Fancy Desiree Fixler Grant Harrison Joel Makower Simon Mundy Tim Mohin Mindy Lubber Judy Samuelson Alison Taylor Gillian Marcelle, PhD Denise Hearn https://lnkd.in/erxndbtp