Asset managers and investment specialists taking part in a Camradata roundtable believe that environmental, social and governance (ESG) analysis will be fully integrated into investment management by the end of the current decade.
While there were differences of opinion on what the mainstream would look like, there was broad acknowledgement that, currently, not enough time was given to ESG evaluation with many themes of sustainability taking decades to become meaningful.
Roundtable participants suggested that ESG metrics should not only be used for risk analysis but also be deployed to better identify investment opportunities. No longer should responsible investors be cast as the Cassandras of the investment world but more as innovative return seekers.
The panel also observed that incorporating ESG into everyday analysis, along with other meaningful factors such as stock price evaluation is extremely complex and requires asset managers to be more, not less, skilled.
The roundtable was staged following the UK Government’s announcement that it will mandate all companies listed on the London Stock Exchange to report their greenhouse gas emissions from April 2013. Additionally, the Association of British Insurers’ guidelines to institutional investors have been updated to require that a company’s annual report should include information on ESG-related risks that may impact on the future of the business.
Camradata founder and managing director Steve Butler (pictured) says his company is at the forefront of the gathering ESG momentum: “As we sit at the heart of this development, we’re in a good position to bring together a range of disciplines and views from the industry to build a contemporary picture of ESG’s place in current and future investment thinking.
“Will efforts to reduce carbon emissions damage investment returns? Will the incorporation of responsible investment principles help investors manage risk more effectively? Or will investment returns be damaged by adherence to inappropriate reporting mechanisms? These are just some of the difficult questions facing the institutional investment sector that we aired.
“What we found was that while the pace is quickening, there is also growing demand from across the investment spectrum to understand what is required to ensure this shift is fully understood.”