ESG Integration Across Asset Classes: Equity Indexes, Green Bonds, and Private Equity

A presentation from the Sustainable, Responsible, Impact Investing Conference.

Topic:

Environmental, Social, Governance (ESG) integration is spreading fast. About one out of every investment dollars $5 (over $8 trillion) use ESG factors in investment decisions. Large asset owners include sustainability indexes. ESG factors are being applied to the fixed income space, especially in green bonds. Private equity investments are ready for much more ESG use.

Presenters:

• Sarah Wilson is Director, ESG Investing, Responsible Investing at TIAA.
• Thomas Kuh, PhD was Executive Director, ESG Indexes, at MSCI from 2010 to 2017.
• Ryan Miller is Vice President at Malk Partners where he leads the ESG transactional advisory practice.
• Jeff Scheer, CFA, is a Director and Partner of Pathstone Federal Street.

Take Aways from Talk:

• Green Bonds: The green bond market has taken off in recent years. Green bonds have mostly been created to fund projects that have positive environmental benefit, such as wind farms, solar plants, clean drinking water, etc. Recently, green bonds have been issued to support social project, such as housing and sustainability.
• ESG indexes for benchmarks and ESG reporting as become more common. There is going pressure to report carbon impact and other
• ESG benchmarks and factors are used more and more
• Private equity is mostly concerned about shorter duration, 2 to 3 years. Private equity is not as concerned about long term impacts. ESG has not been as much of an issue for private equity but ESG considerations have some influence on selection.
• ESG reporting by companies is voluntary. It can be difficult to compare companies if not all are reporting. As more and more report on ESG, there is more pressure to report. Report varies greatly from industry to industry.
• The future for indexes and exchange traded funds (ETF) – they will consider many ESG factors as more data becomes available.
• The panel stated that the ESG performance question has been answered. It is understood that ESG funds perform as well as traditional. The next issue is to measure the impact and compare funds based on how much impact they have.
• As ESG factor evaluation scale increases corporations will need to pay attention.