By Ian Kirwan, Global Equity Analyst at Eaton Vance Advisers International Ltd
In perusing an article over the weekend, I was reminded of the myriad approaches to environmental, social and governance (ESG) investing and the confusion this acronym creates across every part of the investment chain — from clients to advisors to portfolio managers. The different frameworks for ESG — with varying definitions, scoring methodologies and ideologies — all contribute to this confusion.
While I believe there is room in this debate for all manner of viewpoints, most importantly, I want to discuss how Chris Dyer and I approach ESG in the international equity strategies we manage.
A lens on corporate business models
While we welcome the attention ESG is generating, we have already been using this approach for a number of years. To some, ESG means chasing popular investment themes, such as renewable energy. That is not what we do. We simply try to distill everything down to what really matters for any investor: risk and reward. Essentially, we use ESG as another lens to evaluate the sustainability of a company’s business model and financially material issues. We think of each of these letters “E – S – G” as a source of information that helps us better understand the risks and rewards impacting a business today or in the future.
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