To paraphrase the old saw: if you only understand the financial implications of ESG factors, then you don’t understand the financial implications of ESG factors. Only once this is recognized can a firm begin to develop an effective ESG program.
Investment policy Archives
Six questions to ask about your ESG policy
“Hold on a moment”, you may be thinking. “Didn’t you just write a post about the five tests of an ESG policy?”
Well, yes I did. But sometimes we need to revisit things. And it turns out there are not just five tests, but six.
Preparing for SFDR: seven keys to getting to “yes, that’s what we’re doing”
With SFDR starting to take effect from March 2021, ESG policy is top of mind for many investment firms. Collie ESG provides review and development services to help firms get ready.
Pillars of ESG policy #3: authentic connection to the investment proposition
If an ESG program is to be more than a bolt-on, there has to be a genuine connection to the investment proposition of the firm. An asset management firm must ask itself: how does ESG relate to how we invest?
Pillars of ESG policy #2: materiality
Investment firms cannot chase after every potentially interesting ESG idea. Judgment is needed about where to focus.
Pillars of ESG policy #1: Introducing the impactometer
An asset management ESG policy should rest on three pillars: a sense of purpose, a demarcation of the limits of materiality, and a connection to the investment proposition of the firm. In this post, I look at the first of these: purpose.
Meaningful beliefs are the first step toward effective ESG investing
An ESG beliefs exercise captures the collective view of the firm’s professionals and creates internal alignment; the beliefs should be known, accepted and applied across the organization.
Does your ESG policy pass these five tests?
You want to be confident that your ESG policy rests on a solid foundation and can be defended in the event of challenge. These five tests are a useful framework to that end.
ESG objectives do not need to come at the expense of financial goals.
To argue that ESG goals must necessarily compromise financial ones ascribes magical powers to the optimization process – powers that, because of the uncertainty in the inputs and the flatness of the utility curve, simply do not exist.