Value of ESG Integration
Alex Struc
20 years: Asset management
The purpose of this two-part video series is to explore the scope and challenges of creating and implementing a market-leading ESG practice or offering. In this video, Alex introduces some of the potential benefits of ESG integration for investors and investees, including achieving superior returns and lengthening the performance cycle.
The purpose of this two-part video series is to explore the scope and challenges of creating and implementing a market-leading ESG practice or offering. In this video, Alex introduces some of the potential benefits of ESG integration for investors and investees, including achieving superior returns and lengthening the performance cycle.
Value of ESG Integration
9 mins 17 secs
Key learning objectives:
Outline the potential benefits of ESG integration for both investors and investees
Overview:
Local markets and regional rules are constantly at variance with the global ownership of assets and the borderless nature of shared risks and responsibilities. Because financial analysis is so complicated, it is typically left to professionals to draw conclusions and offer recommendations. However, assuming that the current prices reflect a seemingly high level of knowledge and comprehension of danger might lead even experienced investors to make blunders. Some advantages of ESG integration include the potential for greater financial returns and the prolonging of the performance cycle. It's not always a guarantee that integration will be successful because some organisations will have a number of legacy problems to resolve.
What are the potential benefits of ESG integration for both investors and investees?
- Opportunity to achieve superior financial returns A strong ESG lens could enable a better cross-pollination of ideas and encourage broader collaboration allowing analysts to spot opportunities early and position them advantageously, ahead of others. The upside of getting the ESG integration right is significant because businesses are going through transformation across healthcare, e-commerce, banking, asset management, autos, and many other sectors.
- Better Capital Reservation A solid fundamental analysis with a deep understanding of the transitionary dynamics can also help investors avoid losses. Globalisation, technology, demographics, climate change and the depletion of natural resources are putting the legacy financial structures at risk. A thorough ESG analysis can help investors anticipate risks and take a defensive posture by liquidating or reducing exposure to the most vulnerable positions.
- Lengthening of the performance cycle Environmental, social, and governance considerations offer a cognitive bridge between highly sophisticated investment professionals and the public. ESG issues are more personal and relatable than a categorisation of risk or a balance-sheet statement. Clients will be less likely to withdraw capital in periods of heightened volatility, and in some cases allocate more to a chosen strategy or manager when they understand the risks better.
- Making an impact by solving a real issue Making a real impact satisfies a strong calling and our collective altruistic tendencies of being in the agency of others. Personal drive for meaning and to leave a legacy was separate from our financial decisions historically but is coming to the fore.
Alex Struc
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