Information is power
There are now training courses available on ESG investing. Major groups, like Federated Hermes, the combination of Pittsburgh based Federated Investors and our own Hermes, which manages amongst others the Post Office pension fund, have put out significant research on how ESG compliant companies might affect portfolio performance. Let’s face it, complex algorhythms allow those with a mind to justify a particular approach to investment to slice and dice data to arrive at interesting, but not always useful, conclusions.
Don’t get me wrong. I’m far from being against ESG investing. Indeed, more focus on how we build a sustainable planet must be a good thing. Those television images of waste plastic disrupting our sea and river life and the apparent melting of the ice caps are issues we all need to be concerned with. And ESG is about more than these major worries. Gender balance, treatment of employees, executive pay – all might fall into the matrix that managers will be taking into account as they choose the companies to back.
I’m not sure all this will have any impact on portfolio performance, but it just might turn out to be a force for good. It may even become a necessity if investors start insisting that the managers of the funds in which they invest adopt a sustainable approach. The climate change protests demonstrate that there is a growing concern over how we look after this planet of ours. I expect to need to learn more about ESG investing as time goes on.
Going viral
Meanwhile, there have been other issues to occupy my mind at the moment as I sit down to write about sustainable investing. The coronavirus has seized the news headlines and dominated investor sentiment for weeks now. Such has been the volatility this outbreak has engendered that trying to report on how it might affect market behaviour, knowing that a few weeks will intervene between my assessment and you reading this, is clearly pointless. It could turn out to be a major contributor to economic performance – or perhaps it is already history. I hope the latter.
Brian Tora is a consultant to investment managers, JM Finn.
