Exclusion of companies from the potential investment pool is not the sole objective of RI, however. It is also about finding out which companies do well (or are improving) when ESG factors are analysed. As this realisation is growing, the market is slowly moving away from an approach driven by exclusion-only to a more inclusionary approach.
For the investment management industry, the transition to include ESG factors in the investment process means an expansion of skills for analysts and portfolio managers. This can also be observed by looking at the CFA curriculum, the leading certification globally for analysts and portfolio managers, in which the focus on ESG factors in the investment process has been increasing.
Ultimately, responsible investing and ESG integration is simply a more modern and complete approach to investing. Integrating ESG factors in the investment process is in the best interest of clients as it can contribute to better risk-return characteristics of investment portfolios. Investors who have not looked at ESG factors during their investment process actually have yet to finalise their investment analysis.
Jeroen Bos is head of equity specialties at NN Investment Partners