From the desk of
Doug Couden, CFA
With companies and investors increasing their public commitments to sustainability related goals, the transition process presents the opportunity for investors to help enact real change. However, meeting these goals means different things for different sectors and different companies - some will need to fundamentally change what they do and how they do it, while others can achieve their targets with more modest shifts.
From Concept to Reality: The Next Phase of the ESG Transition Is Here
Although moving to a more sustainable future is clearly desirable and presents an array of investment opportunities, transition does not come for free and the question of who should bear that cost sits largely unaddressed given the intersection of government and corporate policies. For investors, there is also the question of whether it is better to invest in sectors (and companies) that are more advanced in their transition process or those that are just starting out given the costs and potential return trade-offs involved.
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Chief Investment Officer,
Partner
Companies Are Increasing Their ESG Disclosure
There are multiple frameworks to choose from, and a recent Bloomberg study suggests that companies are relying on voluntary frameworks in their annual filings more than ever. In 2022, companies mentioned all six frameworks in more 10-Ks than five years ago. And just four months into 2023, five of the six frameworks have already been mentioned in more 10-K filings than last year.
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Sources: Bloomberg Law EDGAR Search, BakerAvenue. As of 4/18/2023. Form 10-Ks sorted by filing date.
Growth Has Slowed For ESG-Oriented Funds, But Remains Above Overall Fund Industry
Sources: Barclays, BakerAvenue. As of 3/31/2023.
Socially responsible investing (SRI) assets and flows are up only slightly over the past year. While slow relative to the rapid growth rates of 2018-2021, they are outpacing the overall fund space. Strength in Europe, driven by favorable policies, is offsetting weaker US demand.