They suggested that there are effectively five different strategies, which I summarise (with a little of my bias/interpretation) as follows:
They said that (2) and (3) are the fastest growing styles.
They also pointed out that the different agencies which assess corporate performance on the various metrics sometimes have different recommendations. Tesla, which always seems to be a “marmite” example, was cited as a company which had caused such a headache. Presumably this is because while it may be an environmental star it is also considered a governance black hole. https://corpgov.law.harvard.edu/2019/08/04/teslas-governance-record-and-esg-monitoring/
Governance has long been considered a fundamental part of how “quality” style fund managers assess companies. Environmental has become a focus in recent times, but many of the social benchmarks remain difficult to appraise and evaluate. Metrics across the board are difficult to identify and then measure. This is probably not a field within which regulators should play.
At GBIM we are trying to be pragmatic by sticking to our philosophy of offering bespoke portfolios to our clients.
We offer a tailored “ethical & responsible portfolio service” based on clients’ preferences. This means that while we can apply a negative screen to provide a “no tobacco” or “no oil” portfolio we can also include investments which aim to have a positive impact. The transition to profit with purpose is already underway in areas such as Agriculture, Diversity and Health to name a few.
It is therefore important to establish at the outset which areas are of most importance to a client by helping them classify their own priorities. GBIM separates portfolio goals into six main themes, derived from the UN sustainable goals: Basic Human Needs; Climate; Decent Work; Healthy Ecosystems; Inclusiveness & Wellbeing; and Resource Security.
We agree with JP Morgan that there are different ways of interpreting clients’ requirements, and we hope that we have found a way to address those requirements in a flexible and responsive way.