The asset management and pension industry are now, more than ever, focusing on Responsible Investment (“RI”), which incorporates environmental, social and governance (“ESG”) factors, within their investments. Significantly more managers are introducing responsible investment funds and pension schemes are increasingly likening to the idea. Whilst it may not be as feasible as many had hoped or liked at this point in time, responsible investment rules and regulations are only going to increase, paving the way for ESG to play a wider role in the investment industry.
What’s more important is that investors are swiftly and increasingly coming to the realisation that ESG concerns are not all about morals or ideals; they have a large part to play in the value of certain investments. You only need to consider the VW emissions scandal or TalkTalk’s hacking scandal to realise that these ESG factors can have a serious impact on the profits of the companies in which you invest. What investors need to be able to clearly observe is the risks involved in RI and whether they want to incorporate those risks in their investment strategies.
Following this, asset managers have generally sought to better their understanding of ESG issues. However, would it be naive to think that this results in any meaningfully different asset allocations or investment decisions except in the minority of instances?
Having said all of this, the question still remains – how is ESG incorporated into investment decisions? Is it to simply pay for external ESG research to better inform the investment decision or would it perhaps be better tosomehow incorporate ESG factors within any investment analysis? Whichever way is decided upon, there will still be the issue of addressing RI and ESG concerns and risks through engagement with companies.
CAMRADATA’s Responsible Investment Roundtable will seek to find out whether investors are warming to greater ESG incorporation in addition to the likelihood that this should and will play an increasingly greater role within their portfolios. It will also seek to find out whether approaches incorporating ESG factors are indeed feasible at the current time and if so, what exactly are the best ways to implement RI in practice.
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