There's a big governance drive toward ESG. Interest accelerated when [former United Nations Secretary General] Kofi Annan put together the UNPRI [United Nations Principles for Responsible Investment] initiative, and it's become a hot topic in the boardroom. Demand for ESG implementation by managers has grown tremendously. There's a very broad consensus that these are desirable guidelines.
That's the easy part. It becomes much harder when you take a cold, hard look at ESG, and you start thinking about implementation and cost. The first stroke of ESG has been exclusionary policies — of stocks that have very poor scores in terms of ESG — which have some impact on portfolio construction. But it's not very meaningful, especially if these are long-only passive portfolios. If you go to the next step, which consists of saying, 'Let's fully integrate E, S and G in all of our processes,' in an equity market-neutral format and manage to constant volatility or risk, then you have much more meaningful impacts from deploying these strategies. When you simulate the cost of implementing them in an integrated fashion, you start coming up with some interesting data.