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Name of Style: ESG Plus

Investment options which significantly include environmental, social and governance issues into their investment research to improve risk management

Brief description of Style

ESG Plus can be a ‘fund level’ or ‘company wide (i.e. all funds) strategy.

This SRI Style lists funds and fund management companies that excel in the integration of ‘Environmental, Social and Governance’ risks (and opportunities)  as part of their investment research process and often go ‘above and beyond’ common practices (including building in additional SRI strategies).

ESG  is increasingly often used by investment managers to enhance risk management and so support or improve investment performance.

(When ESG is applied across all assets it may or may not be communicated to investors).

For individual funds this strategy will be accompanied by additional SRI activity such as screening or engagement.

SRI approach applied

ESG strategies involve fund managers carrying out additional research that helps them to understand and manage ESG related investment risks and opportunities better.

This research may or may not significantly impact investment selection.

Unless stated otherwise ‘ESG’ does not imply a specific commitment to avoid or support particular types of companies or corporate behaviours – its focus is commonly simply to ‘understand and assess’ risk.

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 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. It is therefore important to look at other strategies that may sit alongside ESG analysis (i.e. the ‘Plus’ elements).

Research of this kind is integral to the running of most SRI/ethical screened and themed fund options – although emphasis on this area varies.

Funds listed within this SRI Style use ‘ESG’ 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

This strategy is commonly employed – although some focus on analysis of this area more than others; those with ESG entries are understood to carry out significant work in this area.

 

 

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