ESG Progress Assessments Need to Focus More on Quality Than Quantity
Currently, roughly 6% of all managed funds in Canada are termed as environmental, social and governance (ESG). In Europe, about 48% of assets under management are classified as sustainable funds, which is a labeling system almost completely similar to ESG.
This disparity seems huge, but Baillie Gifford head of ESG, Catherine Flockhart, believes the quantity of funds and assets is only a fragment of the bigger picture. Flockhart explains that while Europe leads in the space when it comes to quantity, the level of sophistication exhibited by institutions in Canada, particularly when it comes to ESG strategy adoption, takes the cake. She argues that as sponsors and asset managers focused on increasing ESG allocations, they may benefit from evaluating the state of Canada’s market on a quality metric.
Flockhart notes that more ESG doesn’t mean more sophisticated or better quality, adding that it’s a broad term that covers different approaches. She explains that while some studies have shown that good ESG credentials may strengthen the chances of an organization delivering good returns, other studies have shown that it does the opposite. Flockhart also explains that when it comes to quality ESG, all the tools in an organization’s toolkit need to be used.
She adds that ESG criteria helps reveal the opportunities or risks a company is exposed to, noting that this approach is ideal for growth focused on the long-term. Flockhart believes that integrating ESG within five-to-ten-year horizons may produce outperformance. Over time, this strategy is known to prove its value.
Flockhart also discusses the need for justifying strategies, an almost constant flow of information and exhibiting how metrics have been applied, as has been observed in the adoption of ESG in Canada.
More managers adopting this approach to ESG integration may display longer return track records and help offer greater clarity to investors and sponsors. Outperformance may also be attributed to offsetting risk, with Flockhart explaining that organizations which don’t sufficiently develop climate strategies are at risk of being caught off guard.
With no climate strategies, these organizations could be made obsolete by regulatory action or even changing circumstances.
In addition, Flockhart acknowledges opportunities that ESG highlights, noting that asset managers often use ESG metrics to generate alpha and evaluate risk. In her conclusion, Flockhart explains that viewing ESG as a tool that can help managers better understand investments in portfolios allows the metric to be helpful instead of a distraction.
Entities that are systematically integrating ESG within their operations, such as Energy and Water Development Corp. (OTCQB: EAWD), are actually taking a long-term term view of the benefits of these practices, and this ties in with what experts are recommending for those who wish to reap the gains that can result from adopting ESG.
NOTE TO INVESTORS: The latest news and updates relating to Energy and Water Development Corp. (OTCQB: EAWD) are available in the company’s newsroom at https://ibn.fm/EAWD
Please see full terms of use and disclaimers on the ESGWireNews website applicable to all content provided by ESG, wherever published or re-published: https://www.ESGWireNews.com/Disclaimer
Currently, roughly 6% of all managed funds in Canada are termed as environmental, social and governance (ESG). In Europe, about 48% of assets under management are classified as sustainable funds, which is a labeling system almost completely similar to ESG.
This disparity seems huge, but Baillie Gifford head of ESG, Catherine Flockhart, believes the quantity of funds and assets is only a fragment of the bigger picture. Flockhart explains that while Europe leads in the space when it comes to quantity, the level of sophistication exhibited by institutions in Canada, particularly when it comes to ESG strategy adoption, takes the cake. She argues that as sponsors and asset managers focused on increasing ESG allocations, they may benefit from evaluating the state of Canada’s market on a quality metric.
Flockhart notes that more ESG doesn’t mean more sophisticated or better quality, adding that it’s a broad term that covers different approaches. She explains that while some studies have shown that good ESG credentials may strengthen the chances of an organization delivering good returns, other studies have shown that it does the opposite. Flockhart also explains that when it comes to quality ESG, all the tools in an organization’s toolkit need to be used.
She adds that ESG criteria helps reveal the opportunities or risks a company is exposed to, noting that this approach is ideal for growth focused on the long-term. Flockhart believes that integrating ESG within five-to-ten-year horizons may produce outperformance. Over time, this strategy is known to prove its value.
Flockhart also discusses the need for justifying strategies, an almost constant flow of information and exhibiting how metrics have been applied, as has been observed in the adoption of ESG in Canada.
More managers adopting this approach to ESG integration may display longer return track records and help offer greater clarity to investors and sponsors. Outperformance may also be attributed to offsetting risk, with Flockhart explaining that organizations which don’t sufficiently develop climate strategies are at risk of being caught off guard.
With no climate strategies, these organizations could be made obsolete by regulatory action or even changing circumstances.
In addition, Flockhart acknowledges opportunities that ESG highlights, noting that asset managers often use ESG metrics to generate alpha and evaluate risk. In her conclusion, Flockhart explains that viewing ESG as a tool that can help managers better understand investments in portfolios allows the metric to be helpful instead of a distraction.
Entities that are systematically integrating ESG within their operations, such as Energy and Water Development Corp. (OTCQB: EAWD), are actually taking a long-term term view of the benefits of these practices, and this ties in with what experts are recommending for those who wish to reap the gains that can result from adopting ESG.
NOTE TO INVESTORS: The latest news and updates relating to Energy and Water Development Corp. (OTCQB: EAWD) are available in the company’s newsroom at https://ibn.fm/EAWD
Please see full terms of use and disclaimers on the ESGWireNews website applicable to all content provided by ESG, wherever published or re-published: https://www.ESGWireNews.com/Disclaimer
