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ESG Performance with Mark Sloss

29 September 2020

 

A trend decades in the making

In 2020, ESG’s time may have finally come. Investing based on environmental-, societal- and governance-oriented principles is a trend influencing fund development, government regulations and attracting investor fund flows. It can be a complicated topic, particularly if you’re trying to find the best approach. The good thing for investors is that there are a myriad of approaches to ESG investing. The bad thing for investors is that there are a myriad of approaches to ESG.

ESG is a topic I love to hate. Not because of the intent of it, but more because many of the methodologies now in play try to distill seemingly subjective decisions into a “check-the-box” type of exercise. In some cases, good and responsible companies may be left out of a portfolio or, in other cases potential exclusions were missed. This summer, fashion company Boohoo made headlines when news broke that despite being given a high grade by many ESG ratings services, the company paid workers in its supply chain less than minimum wage and subjected them to unsafe working conditions.

No methodology is perfect, whether trying to identify good ESG companies or good large-cap quality growth companies. Ultimately it comes down to understanding the methodology, its biases, and whether or not it aligns with your intent. I actually love the idea that investors are increasingly requiring that their investment dollars align with their values and if doing good doesn't materially impact returns, why shouldn't everyone do it?

In 2020, ESG strategies generally have performed relatively well and record flows into ESG funds have followed. Performance, as I discuss with Mark, is also a complicated or at least nuanced topic. We discuss SRI (Socially Responsible Investing) the precursor to ESG and the long held perception of performance concessions with such values-based investing. I also discuss with him the relative importance of E, S and G in the total equation of things and ongoing efforts to standardize ESG metrics.

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Important Disclosure

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

This information originates from VanEck (Europe) GmbH, which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin).

The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice VanEck (Europe) GmbH, VanEck Switzerland AG, VanEck Securities UK Limited and their associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.

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