Where is ESG headed for Fund Managers?

Mercatus invited Francisca Quinn, founder and president of the sustainable strategy and integration advisory firm Quinn & Partners, for a candid conversation about how asset managers are approaching Environment, Social, and Governance (ESG) factors today.

Here are the highlights:

The global pandemic has shown investors that ESG is more important than ever. It’s a stark reminder that environmental and social events can really cause global and societal crises. Companies that already had really good ESG management frameworks and systems in place, such as focusing on their employees and their employee practices, have fared better.

Most companies already have some ESG practices embedded in their processes even if they don’t call it that. For example, if you are an infrastructure investor, you look at the governance policies and the board of a company or an asset before you invest. You will look at the health and safety and the ethical business conduct. ESG is there, it’s just a matter of framing it and putting a plan in place to expand it.

Conditions are different in the real estate and infrastructure industries for ESG. In real estate, it’s more mature, since customers have been asking for it for many years and there is a well-defined return on investment in ESG. In infrastructure, companies haven’t been pushed to do much yet. But that is changing and we’re starting to see pressure for businesses to adopt ESG frameworks.

Real asset managers that are looking to improve their ESG score need to embed it as part of their business process and performance indicators. They will need more standards and systems in place to weave in metrics at every level. Their investors want to see financial returns and risks associated with it, so it’s very important to put a data management framework in place to be able to track it and show its impact.

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