Further on down the road
Picking up the pace: four reasons why ESG is now the way
Walking past performance: stewardship and the sustainable future
For instance, our latest research ‘ESG investing: how Covid-19 accelerated the social awakening’ reiterated earlier studies that found statistically significant evidence of outperformance across the social and governance factors.
Academics are also making the connection between investment outperformance and effective asset stewardship. In fact, we believe that investment is actually two activities rolled into one, namely:
- allocating capital; and,
- being a good long-term steward of that capital.
Stewardship is the less well-known and understood component of investing but – for the international business of Federated Hermes, at least – it stands equally as important as selecting the right assets in the first place.
Many of our engagement targets are aligned with the UN Sustainable Development Goals (SDGs), which are rapidly emerging as the go-to framework for holding companies to account on specific, practical outcomes.
Again, our engagement process is embedded across asset classes and can play out over long periods of time with successes mounting up incrementally.
We have also developed a range of tools that we use ourselves on the investment floor and that we can share with clients to help them assess how effective our ESG and engagement integration is. And as we turn our minds to issues beyond climate change, we will continue to develop additional tools in the sphere of biodiversity and ecosystem loss for example.
New directions: where regulations are pointing
We believe ESG is an essential component of investment fiduciary obligations – a view increasingly reflected in regulations.
Next steps for investors: how active choices can achieve real goals
Putting project-related instruments to one side, sustainability-linked bonds that relate interest payments to outcomes against pre-specified ESG targets must be the way forward.
In the investment industry we have huge responsibilities for the capital that we manage to the end beneficiaries that have entrusted us. Huge challenges lie ahead, and to tackle climate change and biodiversity and ecosystem loss, we need a systemic view.
From the distance of 2,500 years or so, Laozi once more steps up with good advice: “Your own positive future begins in this moment. All you have is right now. Every goal is possible from here.”
The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other communications. This does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.