ESG – Funds


fund will be,” MacArthur says. “That is not to say that incorpo- rating ESG factors cannot be achieved.”


Across credit, global and emerging market equities, there seems to be a consistent outperformance of the sustainable versions of our strategies.


Peter Walsh, Robeco UK


pure ESG funds. If they invest in a company because it is using less water in its operations and cutting its level of harmful gas emissions, it may be failing to ensure safe working practices for its staff in one of their subsidiaries in Asia. “Funds that have ESG integration can be created, but the puri- ty question is the real challenge because it is tricky. There are shades of grey at a corporate level,” MacArthur says. Part of the issue here is that the product and services business- es offer changes over time, as does how companies conduct their business. “It is those changes in dynamics at the corpo- rate level which are juxtaposed against changes in the sustain- ability narrative and market concepts,” MacArthur adds. “Who was talking about privacy issues in technology five to seven years ago? It is front and centre today. “The changing concept of what is material in the sector and changing corporate dynamics makes it tricky to create a pure ESG fund.


“It is tricky because no company is perfect and perhaps no Sponsored by


Whether or not asset managers can build a pure ESG fund has become something of a philosophical debate. “Pure is an interesting term. If you tried to apply a test of puri- ty you would not own any company,” Parry says. “The problem is that society overall is in an environmental deficit. We will use up an entire year of Earth’s resources by 1 August. “Given the events we are seeing around the world with the hu- man cost of Covid-19 and Black Lives Matter, we are also in a social deficit. “Then you have the definitional problem of what ESG is. We don’t label any of our product ESG; ESG is an input not a label. We regard it as Finance 101,” he adds. For Parry, there is no universal definition of what is and is not suitable for a sustainable fund, which is part of the problem. This is a case of not being able to please everyone. “Taking a moralistic viewpoint is dangerous,” Parry says. “It’s not our job to impose our values on client portfolios, as while we all have values, they differ from person-to-person. One per- son’s morals can be another person’s good night out.” Childe says that there are many views on what constitutes a pure ESG fund. “At Manulife we have put a lot of thought into it,” she adds. “We are looking at how we can provide differenti- ated credible and high-quality ESG funds.” For Childe achieving purity in a sustainable fund is down to the investor. “It is a personal decision as to what constitutes a pure approach for the individual investor and they need to un- derstand the approach of the ESG manager in question and make sure that it aligns with their goals and values,” she adds. Isleib says that the definitions of ESG are broad, so investors have to know what the fund they are backing aims to achieve. “The manager needs to be explicit in terms of the portfolio’s strategy and the restrictions of the securities that they can in- vest in,” he adds. “These are important questions to ask and some of the bad press that comes is when investors did not ful- ly understand what the intention of the portfolio was.” Debates such as this might be rare in the future. Walsh fore- sees a time when investors will not be able to find a strategy la- belled sustainable. “There is no doubt that one day there will be no such fund called sustainable, because all funds will have some element of sustainability in them.” He adds that this is already happening. “If you look at investor behaviour it is quickly becoming minimum criteria for manag- er or fund selection.”


Issue 94 | July 2020 | portfolio institutional | 33


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44