CEOs are being pulled in many different directions. Where once they could focus solely on earnings as the single metric of success, they now must account for the impact their actions may have on wider society.
Engaging with governments on sustainability issues is much harder for investors than engaging with companies. But despite the challenges, doing it well can lead to stronger economic growth for the issuing sovereign and positive alpha for investors.
From the palm oil plantations in the jungles of Southeast Asia to the heavy industry of China’s steel mills, environmental pressures are contributing to a seismic shift in the way these sectors operate.
Financial criteria are just one part of the puzzle when considering companies for portfolio inclusion, says Vincent Durel, a portfolio manager with a focus on sustainable investing.
The increased focus on ESG issues is transforming approaches to investing. Companies and asset managers are changing the way they engage with each other, resulting in a positive outcome both for investors and society as a whole.