What Style is ESG Investing ?
(Third Quarter 2010)

While the financial crisis of 2008 may have changed some perspectives on risk, interest in Environmental, Social and Governance (ESG) issues remains firmly in place as investors continue to look for sustainable investment options. With growing allocations into ESG, consultants, index providers and investors have proposed a range of classifications for ESG. Should ESG be a separate asset class? Should it be a niche investment? Or should it be considered a separate style?

From the view of an institutional portfolio, it is important to differentiate ESG from focused investment themes, such as renewable energy, human rights, environmental sustainability, and others where the concept is to capture future growth in niche market segments. ESG, instead, is meant to look broadly across the market with the goal of using a systematic and structured process for evaluating companies on important non-financial performance and using that information in the investment decision. When ESG criteria become integrated into the stock selection process, ESG can provide good insights into risk exposures as well as sources of return.


In this newsletter we take a closer look at the investment characteristics of ESG portfolios to determine if there is a unique investment style or if ESG can be broadly integrated into core strategies.

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