ESG investing has become a mainstream trend in the investment world, with a focus on environmental, social, and governance factors that impact long-term risk-adjusted returns for fund members. What was once viewed as a niche concept has now evolved into a fundamental aspect of investment strategies for institutional investors.
Valeria Dinershteyn, NTAM director of sustainable investing client engagement for EMEA, highlighted the evolution of ESG approaches within portfolios, emphasizing the shift from exclusions-focused strategies to more comprehensive integration methods that consider stewardship and impact.
Investment professionals like Jessie Pettigrew from Equip Super acknowledged the growing acceptance of ESG factors in forming capital market assumptions, recognizing the collective weight of these factors in shaping investment outcomes over time.
Paul Docherty, head of portfolio construction and risk at REST, emphasized the importance of integrating climate-aware assumptions into investment processes to effectively manage long-term risks associated with climate change. Such considerations align with the industry’s shift towards incorporating ESG principles into standard risk management practices.
Talieh Williams, Cbus head of ESG integration, highlighted the role of ESG factors in informing investment decisions, even when they may not be the sole driver of those decisions. Understanding ESG risks and opportunities provides a foundation for informed decision-making and engagement to drive positive change.
Despite the progress in ESG integration, challenges remain, particularly concerning the availability and quality of ESG-related data. Liza McDonald from Aware Super emphasized the need for credible data to support decision-making and stressed the ongoing efforts to enhance data quality for more informed investment choices.
Fi Mann, head of listed equities and sustainable investing at Brighter Super, noted the significant improvements in data quality for ESG decision-making in recent years, underscoring the importance of collaborative efforts between asset managers and investment teams to ensure data accuracy and relevance.
ESG investing goes beyond data analysis, requiring a human touch to validate insights and drive meaningful actions. Pettigrew highlighted the need for active engagement with companies and stakeholders to effect positive change at various levels, emphasizing the role of super funds as universal owners in shaping sustainable outcomes for members.
McDonald emphasized the diversity of approaches to ESG integration across funds, emphasizing the need for tailored strategies that align with each fund’s unique objectives and member demographics. The industry’s collective efforts in responsible investing aim to maximize risk-adjusted returns for members while promoting sustainable investment practices.
Ultimately, the evolution of ESG investing reflects a broader industry shift towards integrating sustainability principles into standard investment practices. As super funds navigate the complexities of ESG data and decision-making, the goal remains clear: to achieve optimal outcomes for members while contributing to a more sustainable future.
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