There is a lot of ESG and Climate news today, including many comments on recycling – we would encourage you to read the ESG and Climate report linked (Trash or Treasure…), which talked about recycling in detail.
Today we would rather focus on a headline that talks about major money managers doing proprietary internal ESG analysis rather than relying on third parties, as it fits neatly with the ESG and Climate report that we will published earlier today. We see a convergence of pressures on money managers, from their regulatory bodies, to ensure that the ESG fund they are selling is fit for purpose, from the lack of structure in ESG reporting, leading to major inconsistencies and the opportunity for greenwashing and/or simply the use of selective data, and because some shareholders (investors in pension funds, etc.) want their money manager to play a more active role in pressuring corporates to do a better job. As we discuss in the report later today, getting to the bottom of whether presented ESG data is accurate and appropriate is complex especially for industries with a significant and diverse environmental footprint. The stakes are getting higher as the assets under management increase.
Only the large money managers have the fee base to be able to afford to do dedicated in-depth company by company analysis above and beyond simply vetting which metric or ranking provider to use. If these money managers can create better empirical measures for the companies that they invest in and (even better) out-performance, this may give them an edge in the ESG space. Complexity can drive opportunity for those willing to dig. Those willing to dig and then take an activist approach may make more money.