Investire | May 2023

Initially unknown, then compulsively chased and currently regarded with detachment, ESG investing has been subject to the neurotic attention of the market, in particular of Asset Management Companies.

All agree that the path has been laid out and that ESG investing represents the ultimate goal for the industry of asset management.

Three sets of data (recently represented in unequivocal fashion by one of the world leading asset managers, JP Morgan Asset Management) can silence even the most skeptical of investors.

The first set of data concerns the environment – the number of meteorological disasters has increased from just over 700 in the decade 1970-1979 to over 3.100 in the decade 2010-2019, with economic loss connected to property damage amounting to 286 billion dollars.

The second set of data concerns social impact – in 2020, the potential loss of working hours due to heat amounts to 470 billion hours, which implies a loss of 2.400 billion dollars, equal to -14% of the global GDP.

The third set of data concerns governance – the number of controversies over climate change has increased by 46% between 2020 and 2022.

The issue then is not the goal, but rather the path and how arduous it is.

The fate of ESG investing over the last twelve months offers some food for thought.

With due exceptions, over the past year ESG funds have suffered more than others due to their narrower investment universe, which excludes important fields such as energy or the oil & gas sector.

Moreover, in a time privileging value-oriented strategies, the vast majority of ESG funds based on growth-oriented strategies has been penalized.

Not to mention the unfavorable wind blowing in the United States, instigated by the powerful lobbies of armaments and oil industries, incredulous at the chance to hit an easy target.

In truth, things have been changing – perhaps the most emblematic example is the departure of a giant like Vanguard from the coalition Net Zero Asset Managers; the initiative brings together about 300 asset managers involved in the fight against climate change, which support, through their investments, companies committed to reaching the goal of net zero greenhouse gas emissions by 2050 or sooner.

Thus, it seems that the sustainability, so to speak, of sustainable investments depends also on their performance.

The challenge, then, is betting on non-virtuous companies planning to become virtuous and following a path that starts with careful research that does not exclude entire sectors a priori, but rather includes an attentive analysis of those sectors precisely.

With the incorporation of NN IP, Goldman Sachs has enriched existing investment processes, strengthening ESG integration in the whole range of products. It is clear, then, that identifying the most promising opportunities and the right moment to invest is not an easy task in a context of volatility of the markets.

For investors, the key is finding a partner with a deep understanding of economic transformation as well as experience in contributing to model it.

Nicola Ronchetti