WEALTH TALK SUMMARY - Why ESG investments matter
Linda-Eling Lee of MSCI
Jul 19, 2017
Speaking at Hubbis’ Malaysian Wealth Management Forum 2017 in July – Linda-Eling Lee of MSCI says new appetite among investors is prompting a wave of interest in investing based on environmental, social and governance (ESG) factors.
The excess of information upon which investors base their decisions has propelled the application of ESG in investment products and client portfolios, according to Linda-Eling Lee, managing director and global head of ESG Research at MSCI.
For example, she says there are now over 125 ESG-focused ETFs, with roughly USD10 billion in AUM – more than double the level in 2015.
Investors’ objectives are also driving interesting in ESG. For instance, they believe that incorporating ESG can improve their investment results. At the same time, they want their investments to make a difference in the world, and reflecting their values.
The new flow of information is also changing who enforces the rules in the marketplace, with the need now for portfolio managers to systematically incorporate this new type of information.
Further, since the information is increasingly coming in quantifiable forms, it is easier to integrate into valuation and risk models, as well as into portfolio construction. This is what ESG analysis is essentially all about, adds Lee.
In short, when institutional investors talk about integrating ESG, they are striving to create better and more transparent portfolios, she explains.
And it is becoming more common that the leading wealth managers in Europe and the US are starting to invest in developing their technical capability and tools in relation to ESG. Their aim is to incorporate better products in the portfolios of the next generation of wealth owners.
Wealth managers want access to investments that they hope clients such as Millennials prefer and are starting to ask more questions about, she adds.
Managing Director, Global Head of ESG Research at MSCI