Industry experts discuss sustainable investing techniques and implications for performance professionals at PMAR summit in Philadelphia last week
With expectations for asset managers evolving and Environmental, Social, and Governance (ESG) characteristics becoming increasingly important for investors, tools evaluating assets are becoming essential.
Speaking on the ESG panel at the PMAR event last Wednesday, Gustavo Benares Torres from Invartis defined ESG integration into investment as the “explicit and systematic inclusion of ESG factors in investment analysis, decision-making and operational processes.” The integration level seen in the industry today ranges from very simple, such as reporting of third-party scores, to complex such as scenario analysis.
A critical ingredient of ESG attribution is the ESG score. Torres mentioned that it is “very important” that investment professionals understand the underlying methodologies of how ESG score providers calculate their scores because these methodologies vary widely across providers and the weights assigned to the various subcomponents similarly differ.
PFaroe Portfolio Management is agnostic to the vendor providing ESG scores. Users of the tool can use Moody’s ESG scores or the scores and sub scores calculated internally or sourced from their vendor(s) of choice.
The PMAR summit illustrated that ESG has emerged as one of the trendiest topics for discussion among investors and asset managers. Companies which will be able to effectively integrate ESG into their investment analysis are set to excel in their analytical efforts.