The money manager says sustainable investing is here to stay, but ESG-labeled index-tracking portfolios are the wrong path.
Electricity towers, power lines and a wind turbine near Barnstorf, Lower Saxony, Germany, on Tuesday, Aug. 23, 2022. German power surged to above 700 euros a megawatt-hour for the first time as panic over Russian supplies gripped markets and politicians warned citizens to brace for a tough winter ahead.
Add it up and there’s little doubt the political backlash against ESG, led by Republican presidential candidates Ron DeSantis and Vivek Ramaswamy, is starting to have some impact. Decisions about the relative importance and weighting of particular investment considerations and metrics vary from company to company, so more hands-on, qualitative research is required.
And the numbers show the $1.3 billion Neuberger Berman Sustainable Equity Fund has slightly outperformed ESGU over the past three year, with an annual return of 10.6%. ESGU gained at an annual rate of 9.8% in the same period. This is the main reason why “we’re skeptical that systematic, rules-based, passive approaches of ESG-integration can be as successful as active approaches,” he says.
Hanson contends that a critical part of this process is proper engagement with corporate management. While index fund providers often have stewardship teams that meet with company officials, they rarely press for real, consequential change, he says.
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