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Fund EcoMarket

the sustainable, responsible and ethical investment information hub

Name of Style: ESG Integration

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

Brief description of Style

ESG Integration can be a ‘corporate level’ (ie all funds) or a single ‘fund’ strategy.  Fund managers with ESG integration strategies consider ‘Environmental, Social and Governance’ risks (and opportunities)  as part of their investment research process.

ESG Integration is most commonly used to aid risk management as it helps fund managers 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.

For individual funds this strategy may be accompanied by limited ethical, social and/or environmental screens or themes.

SRI approach applied

ESG Integration involves fund managers carrying out additional research that helps them to understand and manage ESG related investment factors better.

This research may or may not significantly impact investment selection.

Unless stated otherwise ‘ESG Integration’ 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, particularly over the longer term.

Variation across Style segment

Approaches vary.  For some companies researching such issues is integral to the purpose of their entire business and fund management strategy and may be linked to a greater commitment to invest in solutions companies – perhaps via specific named funds.

For other fund managers this is seen as enhancing more conventional investment decision making in a way that helps identify well managed companies that are hoped to outperform their peers.

Impact on investment strategy

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

See ‘Policy, Feature and Corporate Activity’ filters on Fund EcoMarket tool for fund/fund manager specific information.

Fund manager explanations further explain the crossover between this area and 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 enhance fund manager’s every day decision making without necessarily focusing on themes, trends or areas of exclusion.

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

Funds listed within this SRI Style use ‘ESG Integration’ as their core strategy whereas other groups have additional strategies and themes.  See fund specific information for further information.

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.

 

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