Michael Shagrin writing in Fundfire (a Financial Times service) poses the rhetorical question:  Will ESG investing strategies be set up for a fall “if the U.S. equity markets cool off”?  He examines the results of a recent survey by Commonfund that suggests that institutional investors may grow “suspicious” of ESG strategies in a downturn.
Just below half of survey respondents said they didn’t expect that SRI criteria (such as ESG strategies) would be an important part of their investment policy over the next three years — and 25 percent said that ESG would play a greater role in portfolio management at their firm.
Why the “suspicion” or lack of interest? Could be a mis-perception that ESG strategies are “confining,” and reduce a manager’s ability to produce “top flight returns?”  On the other hand, ESG strategy proponents expect to sleep more soundly and have better returns than the “un-convinced,” Shagrin reports.
Could be lack of understanding of ESG strategies that is back holding greater institutional investor acceptance of the approach?  Commonfund’s president, Keith Luke, thinks that is part of the thinking behind responses to the survey.
G&A EVP and partner Louis Coppola adds his perspective: “In our experience, during market downturns (note: like 2008-2009), money flow to safety and we have seen evidence of faster recovery of companies with sustainability integrated into their strategies…”   Read the full for an informative look (in the survey results and perspectives offered) at “ESG’s Future…”
Investor Confusion Clouds ESG’s Future
(Thursday – March 26, 2015)
Source: Michael Shagrin, Fund Fire – Environmental, social and governance (ESG) strategies were hit hard by outflows in 2013 and 2014, and new data suggests that may just be the tip of the iceberg…