ESG investment, difficult to go by

What is the yield?

The most acidic myth when we talk about ESG is certainly the question of performance. Many investors are interested in this type of investment, but refuse to launch, for fear of leaving money on the table.

According to Simon Ste-Marie, Vice-President and Specialist of the FNB, Invesco, this myth seems to have originated in the 1960s. It was at this time that the ESG began to take on importance, but now- there, managers applied only exclusions, which actually led to several degrees of under-performance. Since then, the ESG has used a number of other tools, but this bad reputation has stuck to it.

Indeed, David Ung, Chief Analyst at ESG, Placement Management Manuvie, reports that this is one of the three questions he hears most often on the part of managers.

However, the ESG is far from performing well. According to the two experts, this is more of a form of risk management.

A company that rejects too much CO2 could receive an amendment, which would be different to his financial statements and therefore to his investors, illustrious Simon Ste-Marie. And as for a market crash, it is difficult to predict when this will happen. It is therefore advisable to invest in companies that address these risks before they are overcome.

ESG allows to enrich the analysis, to make a better evaluation, more holistic, and allows to better align the placements with the interests of the client, supported Maral Dolmadjian, Specialist, placement products, Operations Management Global Placements Sun Life (PMSL).

According to her, in addition to allowing better risk management, it also allows to seize placement opportunities. Indeed, David Ung points out, by encouraging companies to adopt management that takes these criteria into account, it will push them to improve. “If we are able to be there before companies improve, we can catch the alpha,” he concludes.

As for underinvestment, this strategy, which is based on the under-yield myth, is no longer systematically used. For example, PMSL believes in advancing the commitment rather than investing. “We need to be at the table, to have a voice to move towards sustainable and concrete economic results,” says Maral Dolmadjian.

Lack of knowledge

If the myths still have tough skin, it’s just that there are more clients, the advisors also lack knowledge when it comes to investing in ESG. A survey by the Association for Responsible Investment (AIR) last January showed that if 85 % of consultants interviewed said they were too or too comfortable to have a conversation on responsible investment, their knowledge of the subject. is weak. Thus, only 6 % of respondents correctly identified the three statements as true out of ten statements on the IR.

According to Simon Ste-Marie, this lack of knowledge explains the reluctance of advisers to address the subject of ESG. Many of them also pretend to have only older clients and that the latter are not interested in responsible investment. However, it is false, according to the expert. According to surveys, all generations have an interest in investing in ESG.

The latter understands that there are many different terms, definitions and methodologies, but he advises not to paralyze and rather start by step.

David Ung also believes that education is essential and that it must continue, given that the sector is constantly evolving. “The sooner you learn, the sooner you can talk,” he hammered. He recommends especially not to wait before launching, because, according to him, he is certain that customers will address the topic, and even more so than to think about it.

Indeed, the interest of customers grows without ceasing. According to an AR opinion poll published last December, 77 % of respondents said they wanted their financial services providers to report on responsible investments that corresponded to their values, while only 27 % said they did. they had already asked if they had an interest in responsible investment, and only 33 % of the people interviewed said they had responsible investments.

It is thus seen that there is a great deal of interest for these placements and that the ESG investment is not about to stop. This is especially in the interest of investors in addition to government regulations. In Europe, investment funds must now specify whether their funds are responsible investment funds or not, which can complicate marketing for non-responsible investors. Thus, governments encourage companies to take into account ESG factors.

And the eclipse?

Since the rise of the ESG, there has been a lot of talk of ecoblanchism. While the regulation regulates the case of this trend, how to ensure to avoid rotten apples?

David Ung answered. According to him, funds and managers must be evaluated according to three criteria:

  • Clarified: if one wants to invest in an ESG fund or with a manager, the objective must be clear;
  • Transparency: the fund or manager must publish its data each year to ensure that it is close to its objectives;
  • Credibility: what are the ESG performance notes of the fund or what does the manager recognize?

If it is difficult to answer these questions, it is important to then contact the manager or service provider. If the answer is still vague after that, David Ung recommends avoiding the fund or the manager.

In conclusion, the ESG is not a fashion, especially if we take into account current global warming and geopolitical tensions. Don’t wait for customers to talk to you, take them in front. Embarquez, before you find the train

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