Understanding the noise that comes with ESG investing
As environmental, social and governance (ESG) investing continues to build a following among institutional asset owners, the idea that returns might suffer when incorporating ESG factors has been largely debunked. Corporate reporting on these factors is improving, which has made it easier for managers to build them into their investment processes. But when the individual factors of E, S and G are taken into consideration, a research report from CFM (Capital Fund Management) ― Is ESG an Equity Factor or Just an Investment Guide? ― shows that a distinct ESG framework to capture them is not necessarily a requirement for improved returns.
In this Q&A, Philippe Jordan, president of CFM, discusses the research into the cost and value of ESG, and what can be done to standardize ESG to better measure returns.