Rob Furdak, Man Group’s CIO overseeing ESG assets, believes screening for environmental, social and governance risks is not “just to try to make the world a better place”, it also helps improve the “investment process” at the world’s largest listed hedge fund, according to a report by Bloomberg.
ESG may have attracted criticism from high-profile US Republicans, who have variously labelled it as woke, anti-capitalist and anti-American, with GOP state governors, attorneys general, and lawmakers regularly looking to impede the investment strategy, but Man Group has maintained its commitment to the cause.
Speaking at a panel event hosted by Bloomberg Intelligence in London on Thursday, Furdak said: “In terms of how that’s affected our investment process, it hasn’t really impacted us at all,” adding “It really reinforced our focus on financial materiality”.
Furdak explained that his approach with clients in Republican states has been to emphasise that “climate change is a risk and you have to incorporate it into your framework in terms of what the potential risk is to an investment or what the potential opportunity is in an investment and link it back to that financial materiality”.
Man Group has identified ESG risks such as the exposure of food companies to drought, with Furdak giving the example of an unnamed poultry producer to demonstrate how extreme weather raised its costs while flock numbers went down, which he said “really impacted profits and hurt the stock price”.
Furdak also highlighted risks in the supply chains of portfolio companies, an issue that becomes especially relevant to the mining and beverage industries when they are in areas exposed to drought.
Virginie Maisonneuve, Global CIO for Equities at Allianz Global Investors, who spoke on the same Bloomberg Intelligence panel, said that investors needed to think of ESG “as a long-term theme in a disrupted world, in a world that’s putting together a new world order. What you want is quality. You look for stability, you look for resilience. And I think ESG provides that in its analysis.”
Last year saw many ESG investors experiencing substantial losses, including the S&P Global Clean Energy Index — whose members include Danish multinational energy company Ørsted and solar products and solar energy provider SunPower — which fell more than 20% and has yet to make a recovery this year.
In the US, fund clients withdrew a net $5.1bn in the final three months of 2023, according to a Morningstar analysis, marking record outflows combined with $1.2bn in Japan.
These losses were offset by the Nasdaq Clean Edge Smart Grid Infrastructure Index gaining more than 20% the same year.
“There’s this perception outside the US that the US is incredibly anti ESG, but it’s a very vocal minority that seems to be getting the headlines,” he said. “There are actually more assets in pro-ESG states than there are in anti-ESG states.”