Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. Custom Media
April 02, 2018 01:00 AM

How Themes Can Help Make the Most of ESG Investing

Sponsored Content
This content was paid for by SPONSORED.
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Martin Grosskopf, MBA, MES

    VP & Portfolio Manager

    AGF Investments Inc.

    At AGF Management Ltd., Martin Grosskopf, portfolio manager and director of sustainable investing, focuses on four broad sustainable themes: energy and power technologies, waste management and pollution control, water and wastewater solutions, and health and wellbeing.

    “These four macro themes evolved over the 25-year life of the strategy, and we redefined them as time went on and certain themes became more robust,” he said. “Each of these macro themes is important from the concept of sustainable development, and that's really what the origins of the strategy were.

    “They provide a lens to track significant changes in society and the market, and where there's environmental and societal pressure on industries to improve their performance,” he added. “It's really enabled us to identify those high-growth areas that result and the companies that are best positioned for it.”

    Identifying such companies is one thing. Analyzing them and investing in them is another.

    Grosskopf, who has a background in environmental science, said he and his team, which also includes professionals with experience in environmental and social analysis and management, use both internal and external resources to help determine whether a company is a fit for the strategy. But sometimes that's not enough.

    Identifying top performers

    “We do find that in some cases there are data inadequacies, especially with small or mid-cap companies,” he said. “They don't necessarily report on everything that we'd like to see them report on, so we need to make estimations. For example, it could be water use that the company doesn't necessarily report, and we would have to estimate what we think their processes would consume in water to come up with a measure on that.”

    Narrowing the large — and growing — ESG universe to four macro themes is a good start, but with more than 4,000 publicly traded companies in the U.S. alone, additional effort is necessary to identify the top performers. And it's not a simple exercise of screening out certain factors, which is what early-stage ESG investing was often about.

    Grosskopf subdivides the four macro themes into about 15 sub-themes, which gives him the opportunity to focus more narrowly on companies that meet his criteria. “For example, autonomous and electric vehicles is a sub-theme for us, and we will look across that entire value chain at companies that we think have good and growing exposure,” Grosskopf explained. “And that would be everything from companies producing lithium or cobalt to companies that are suppliers that could be doing batteries or electronic components, semi-conductors that are going into electric vehicles, all the way to the manufacturers. For us, that would be the value chain.”

    From there, the team digs into the company's fundamentals, looking at factors such as short- and long-term margins and where the company is in its own business life cycle. Those factors influence what Grosskopf looks for in terms of ESG.

    “For earlier-stage companies, the ESG factors and financial characteristics that we apply would be different from an incumbent,” he said. “For example, you can't apply the same metrics to a company like Tesla — as an emergent company in the auto industry — that you would to GM or Toyota.”

    And then, of course, there are the companies.

    “Whether it's water, waste, energy, healthy living, we've got to be really excited about why the company is offering the product and what the growth prospect is,” Grosskopf said. “We would never own a company that we think is in an area that is going to be challenged due to changes in society over the next 10 or 15 years. So we wouldn't own a company because it ranks highly on ESG factors if we don't really like the product positioning.”

    According to Grosskopf, that is one factor that sets AGF apart from other managers as the field gets more crowded. “ESG is part and parcel of why we're selecting the companies vs. it being an add-on, which is true of many products coming into the marketplace,” Grosskopf said. “We're looking at ESG factors from a risk perspective, but the opportunity side is as — or more — important to us. We're interested in companies that are providing the solution.”

    Because of that approach, the strategy has a high active share, meaning it doesn't closely mirror the benchmark that it is measured against, the MSCI World index. Grosskopf said the challenge is structuring a strategy that provides diversification and unique positioning but still tracks relatively well against a conventional benchmark.

    He said the strategy can be customized to cater to clients with a specific ESG focus or interest. In addition, an allocation to ESG can address different objectives for different plan sponsors.

    Addressing the Skeptics

    “We find a lot of different applications. For some clients there has been a decision to make an allocation to ESG or sustainability products,” he said. “In other cases, it is for diversification and to provide access to themes that conventional managers would not focus on.”

    Despite the well-developed work around the ESG themes, the deep analysis of companies under consideration and the strategy's long-term nature, Grosskopf said he still faces skeptics.

    “It's one thing to be a skeptic, it's another to completely ignore the investment opportunities that are emerging,” he said. “If you think of vehicles, the entire capital spend within the industry is moving away from diesel and combustion toward hybrid and electric. For skeptics, my case is simply that you need to have exposure here.”


    “Working with companies on the environmental and social impact issues of their operations provides you with a wealth of insight in terms of how these issues play out within industries,” he said. ■

    The commentaries contained herein are provided as a general source of information based on information available as of Feb. 28, 2018, and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

    References to specific securities are presented to illustrate the application of our investment philosophy only, do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable and should not be considered recommendations by AGF Investments.

    AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), Highstreet Asset Management Inc. (Highstreet), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA).

    AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

    CO114850327.PDF

    AGF final pdf

    CO114850327.PDF >
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print