In an evolving investment world where every investment management firm seems to be banging the beats of ESG drum; the main question arises around how to measure this relatively new investment concept of ESG against financial performance and risk return ratio, which every manager ultimately strives for?
This interesting article from Infrastructure Investor questions two managers about the virtues of each side of the coin....
Does ESG compliance improve financial or operational performance? At the portfolio level, increased global awareness of the critical importance of ESG issues has itself unlocked fundamentally attractive investment opportunities that otherwise would not exist, generating strong financial returns. In infrastructure, these newer opportunities exist especially around sustainable energy generation. For example, the combination of maturing technologies and long-term government renewables support incentives has led to a surge in opportunities. Partners Group has captured attractive financial returns for clients by constructing several of these assets. Our clients are increasingly choosing to screen out assets – or investment managers – with ESG concerns. In line with this, the universe of potential buyers for assets with negative ESG features is steadily shrinking. An ESG-compliant portfolio has a lower exit risk and an exceptional ESG track record might drive higher exit returns.
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