Superannuation funds are realising that environmental, social and governance (ESG) factors should be integrated into macro-level investment decisions, and not merely as issues in individual companies, according to boutique fund manager Solaris Investment Management.
Lisa Domagala, Solaris ESG analyst, said that macro-level ESG and systemic issues was a major theme of the UN PRI conference last month in Rio Di Janeiro.
“To date, most ESG integration and activity occurs at the company level, predominantly focused on alpha generation and preservation. Generally, it aims to ensure that all material ESG factors are considered when assessing company valuations,” Domagala said. “However, market events over recent years have demonstrated that focusing on an individual company level may not be sufficient if broader macro ESG considerations are not addressed. ESG consideration of the future will also need to address macro issues as well as company-specific opportunities.”
Given this, UN PRI will look to address broader market issues, which they believe this will assist in their mission to ensure that responsible investment will become mainstream, Domagala said.
Institutional clients are requesting “ESG cognisance” as part of the investment mandate, while retail researchers and platforms are showing interest in how Solaris integrates ESG into their investment process, Domagala said,
“Institutional and retail investors alike need to be confident that fund managers are considering all material factors affecting their investment portfolios,” she said. “Solaris has invested in ESG integration to ensure we are cognisant of ESG factors that may have a material effect on company valuations”