The popularity of environmental, social, and governance (ESG) investing has spawned a number of companies that are looking to take advantage of the space. Therefore, it’s important for investors to discern between those companies that are using the ESG moniker as strictly a profit-making endeavor or those that actually make responsible investments—as such, one fund manager is taking a strict hands-on approach.
“If fund managers are serious about clean investments, they need to get their hands dirty,” a Reuters article said. “That’s the view of Sasja Beslik, head of sustainable finance at Swiss bank J. Safra Sarasin, as demand surges for companies that perform well on environmental, social and governance (ESG) issues.”
Beslik is actually taken to the field to perform his own research—no need for algorithmic or machine learning tools.
“He himself has turned ESG detective in the past, flying to southern India after reading studies that found high water pollution levels around some factories mass-producing medicines,” the article explained. “Accompanied by a cameraman, Beslik spent 10 days meeting villagers and taking samples from streams close to the plants supplying companies that his then-firm had invested in,” the article added. “He said his samples were confiscated by airport authorities, but that he sent his video evidence of foaming scum in streams to 27 international and local companies with operations there.”
“We got a response in a week from all of them,” said Beslik, who later learned that many factories were proactive and had “improved the capacity of the water-treatment plants”.
To read more about Beslik’s approach to ESG, click here.
ETF Opportunities in ESG
Investors who want ESG exposure via an ETF wrapper can take a look at the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG). EASG seeks investment results that correspond generally to the performance of the MSCI EAFE ESG Leaders Index.
The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index. The underlying index is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
An additional fund to look at is the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG), which has been a popular play for investors seeking exposure to socially responsible investments. USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high ESG performance relative to their sector peers.