Thanks for this. For such an important topic, the collapse of the Anthropocene era, you'd think there would be far more focus on it. When I was researching it I found a study by the investment research firm Morgan Stanley Capital International (MSCI) compared four global MSCI ESG indexes to their parent indexes during COVID-19 and found the ECGs outperformed the rest: they are less exposed to systematic risks including the coronavirus crisis (MCSI, 2020). I hadn't heard of that index, thanks. When it comes to ESGs I've found the devil is in the detail. It seems with ESG indexes as with BCorps you can look good without being good.
Well, in my experience, ESG investment neither outperform nor underperform conventional investment in practice. Sometimes they beat the conventional investment benchmarks, sometimes they do.
But what they definitely do, in my view, is reduce risks, in particular risks that are not priced in conventional markets because companies that manage with respect to environmental and social risks pay attention to things that 'markets' typically don't - until these risks suddenly materialise like in the case of the pandemic.
Thank you for your considered perspective which makes so much sense. It highlights just how bonkers it is for US companies backing off from these to kowtow to Trump. Gregory, Tharyan, and Whittaker (2014) also found ESG companies are better at developing long-term business plans and long-term incentive plans for senior management, which is a part of reducing risk. And it's still a relatively unexplored area that your important piece shines a light on, thanks again.
Thanks for this. For such an important topic, the collapse of the Anthropocene era, you'd think there would be far more focus on it. When I was researching it I found a study by the investment research firm Morgan Stanley Capital International (MSCI) compared four global MSCI ESG indexes to their parent indexes during COVID-19 and found the ECGs outperformed the rest: they are less exposed to systematic risks including the coronavirus crisis (MCSI, 2020). I hadn't heard of that index, thanks. When it comes to ESGs I've found the devil is in the detail. It seems with ESG indexes as with BCorps you can look good without being good.
Well, in my experience, ESG investment neither outperform nor underperform conventional investment in practice. Sometimes they beat the conventional investment benchmarks, sometimes they do.
But what they definitely do, in my view, is reduce risks, in particular risks that are not priced in conventional markets because companies that manage with respect to environmental and social risks pay attention to things that 'markets' typically don't - until these risks suddenly materialise like in the case of the pandemic.
Thank you for your considered perspective which makes so much sense. It highlights just how bonkers it is for US companies backing off from these to kowtow to Trump. Gregory, Tharyan, and Whittaker (2014) also found ESG companies are better at developing long-term business plans and long-term incentive plans for senior management, which is a part of reducing risk. And it's still a relatively unexplored area that your important piece shines a light on, thanks again.
i see 2 rational fund approaches in general for risk-weighted success :
a. ESG, but use standard metrics for public mkt liquidity and screen out worst financial shenanigans (f-score, etc...), limit turnover and fees.
b. research tech deeply in small private space, spread out allocation over many hundreds of companies globally , wait a long time. (GMO\grantham)