There is not enough data to determine the impact of environmental, social and governance factors on performance, said Andy Iseri, senior vice president, global manager research at Callan Associates, speaking Wednesday on a panel at The Forum for Sustainable and Responsible Investment conference in Chicago.
Panelists agreed that asset owners, while interested in ESG factors, will not make sustainable investments at the risk of performance. Shari Gilfillan, equity strategist for responsible investors at UBS Global Asset Management, moderated the panel that also included Mark Hines, manager of public equities at Wespath Investment Management, and Craig Metrick, director, manager due diligence and thematic research at real estate manager Cornerstone Capital.
“Sometimes we talk about return enhancement potential of ESG … we don’t know yet,” Mr. Iseri said, noting there are only seven years of data. “What we do know is that ESG are legitimate risk factors that should be considered.”
The political and regulatory framework needs to be considered as it relates to anti-carbon initiatives and other ESG factors, Mr. Iseri said.
“We don’t want to embrace the anti-science culture, but you have to take it into consideration,” Mr. Iseri said.
In that regard, Mr. Hines said his firm got out of certain thermal coal investments because of concerns that the investment strategy might not be sustainable due to the negative political climate, including China’s energy policy.
Whether ESG-related investment strategies will be widely adopted boils down to whether they can offer comparable return.
“We are all greedy people,” Mr. Isari said. “If (ESG-related investing) doesn’t work, it won’t last. … Like the rest of the industry, we follow the money. If it works, it will live on.”