Howard’s article, ESG Awakening in Fixed Income Markets (see link below), reviews the ways that asset managers like Richmond Capital Management are becoming more actively engaged with management on corporate sustainability efforts. After reading Howard’s article, I (Matt Illian) asked him some follow up questions shared below.
Howard Bos, CFA
offers insights into how bond managers can support corporate sustainability that benefits all stakeholders
Matt (VIIF): Your article makes a strong financial case for incorporating ESG (Environmental, Social, Governance) analytics into portfolio management and at the same time you report that many portfolio managers don't appear to be convinced. How should we account for this disconnect?
Howard (Richmond Capital Management): As fiduciaries, asset managers are focused on providing the best possible returns for their clients. There has been concern on the part of many asset managers that incorporating environmental, social and governance analytics will hurt performance. As highlighted in the article for the Virginia Impact Report, there are now a number of studies which indicate that the additional environmental, social and governance analysis actually enhances performance. As more investment managers incorporate ESG analysis and their investment returns outperform, the investment community will awaken to the benefits of this analysis.
Matt (VIIF): Where do you see interest in ESG strategies growing most rapidly?
Howard (Richmond Capital Management): In the United States, the endowment and foundation market is prime for integration of ESG analysis into their investment portfolios. Many endowment and foundations were already awarding grants based on social impact and did not realize that they could leverage their investment portfolios for social good.
Matt (VIIF): What recommendations do you have for individuals (and investment committees) who are concerned about the impact of their portfolio but feel a bit helpless because all of their investment decisions are made through their investment advisors?
Howard (Richmond Capital Management): The first step in encouraging more impactful investing is for individuals and investment committees to develop specific investment guidelines that outline their investment goals. By succinctly communicating these goals to the investment advisors, investors set the parameters for successful impact investing. As I noted in my article, improving corporate behavior is a by- product of allocating capital to those companies that are more concerned about their environment and provide stronger governance.
or, to view the entire report, click below