A recently published paper in the Financial Analyst Journal, “Why and How Investors Use ESG Information: Evidence from a Global Survey” concluded that the primary investor motivation in ESG is driven by financial reasons, and less by ethical considerations.
ESG information is generally regarded as relevant to investment performance, and in identification of risks and opportunities, but which information is likely to be material for investment outperformance varies by country or the local context, business model and industry.
It is still an option question whether ESG-aligned strategies lead to outperformance, in large part due to establishing data sets with and without ESG factors.
Among the ESG styles that are likely to prevail and become dominant include “positive screening” and “active ownership.”
EEEIG believes that unlisted infra and private equity investment strategies effectively lend themselves to active ownership that can influence managerial incentives to achieve targeted outcomes. As infrastructure is highly heterogenous, and sits within a local context, tailored ESG approaches, comparable across industry lines, may be needed to establish decision-useful and investment-performance relevant ESG data.