Name of Style: ESG Integration

Investment options (other than ethically screened, or themed funds) which significantly include environmental, social and governance issues into their investment research to improve risk management

Brief description of Style

ESG Integration is a ‘corporate level’ classification, not a ‘fund’ strategy.  Fund managers with ESG integration strategies consider ‘Environmental, Social and Governance’ risks (and opportunities) as part of their investment research process for all funds – not just screened or themed funds.

The Fund EcoMarket ‘Corporate Activity’ entries show ‘ESG Integration’ activity and highlight the work that takes in addition to ‘regular’ investment research and analysis.

ESG Integration is most commonly used to aid risk management as it helps fund manages to understand company or sector specific ‘ESG risks’ better.   The aim of this work is to improve investment performance.  Work of this kind may or may not be promoted to investors.

Where ‘ESG Integration’ listings are shown on Fund EcoMarket this means that research of this kind is carried out across all (or almost all) of the investment funds that are managed by that fund management company (and not only for named screened or thematic funds or portfolios).

SRI approach applied

ESG Integration is simply additional research carried out by often ‘conventional’ fund managers – to help them understand and manage ESG related investment factors better.

This research may or may not significantly impact investment selection.

Unless stated otherwise ‘ESG Integration’ (taken as a stand-alone SRI Style) does not imply a specific commitment to avoid or support particular types of companies or corporate behaviours.

SRI Issues

This strategy involves focusing on major, environmental, social and governance related issues that may impact investment returns.

Variation across Style segment

Approaches vary significantly.  For some companies researching such issues is integral to the purpose of their business and fund management strategy (eg search ‘Boutique/Specialist fund manager’ on ”Other Features’ Fund EcoMarket filter).  For others ESG Integration ranges from occasional additional research to thorough in-depth analysis regularly carried out for all investments.

Impact on investment strategy

Outcomes vary.  Taken as a stand alone strategy this area does not necessarily significantly impact investment decision making.

Please read fund manager entries on Fund EcoMarket to find out more about how managers apply this to their ‘conventional’ fund options.  (Fund manager explanations will help explain the crossover between this area and their screened and themed ethical/SRI fund options.)

Who is this Style most likely to appeal to?

People who are keen to ensure environmental, social and/or corporate governance related issues are understood and considered by fund managers – but are not necessarily looking for a screened or themed SRI/ethical fund option.

Associated Styles

ESG Integration is different from other SRI Styles as its purpose is to help inform fund manager’s every day decision making – often across all assets.

Research of this kind is integral to the running of most SRI/ethical (screened and themed) fund options to varying degrees.

Associated Jargon

Risk management, investment analysis, long-termism.

Providers

See Fund EcoMarket ‘Corporate Activity’ product area of ‘ESG Integration’ SRI Styles’ filter to list providers who have responded to our survey.

Also see ‘Boutique/Specialist fund manager’ filter as these organisations typically apply this approach through their business.