With ESG investing becoming mainstream in Europe, sustainable investing pioneers Storebrand Asset Management are concerned that there is an over-reliance on engagement and a rejection of exclusion as an ESG investing tool.
That’s according to Matthew Smith, head of sustainable investment, who overseas the largest amount of ESG-dedicated assets in Europe, at €33.3 billion as of 30 June 2019, according to Morningstar.
“I am concerned about an over focus on engagement as a tool in every circumstance. People spend a lot of time getting themselves worked up about what is best: exclusion or engagement as a strategy, without spending enough time on the context. For us it’s about finding the right tool for the job. What worries me sometimes is that engagement can be used as a smoke screen, which can be used as an excuse or a way of saying you are evolved in ESG without having to do anything with your portfolios. I think that is a risk and it is unfortunate for engagement as a tool,” said Smith.
When used correctly in the right context, often with other investors, Smith believes engagement is one of the most effective ways of having a real world impact on companies.
Henrik Wold Nilsen, manager of the Storebrand Global ESG Plus, added that he is worried slick marketing and public relations can often mask the true ESG credentials of a fund.
“From experience in bringing our fossil fuel free funds to the rest of Europe, some of the competition are stronger on the PR side than actually modifying their holdings. You can have a very strong PR programme, but if you look inside a climate fund and find Exxon Mobil as a top 10 holding, then I think there is a limit about how much has been implemented below the hood,” he said.
Source Citywire Selector