Skytop Strategies: Reflection on ESG Trends, Hurdles, Generating Alpha

Attendees provide insights on sustainable investing at ‘Generating Alpha’ conference.

Navigating through the evolving landscape of sustainable investing and its obstacles dominated recent chatter by some environmental, social and governance (ESG) buffs. Trends within the ESG investing realm and understanding potential risks/opportunities were key focuses of attendees at Skytop Strategies’ Generating Alpha conference held on October 30 in New York City. Here are some insights from conference attendees on the sustainable investing markets:

“ESG is a long-term driver for top performance. ESG is a competitive advantage either for picking better companies or running better companies.”

—David Yeh, managing partner, Capitol Hill, and former senior advisor to the White House

“Incorporating ESG in emerging markets can help investors both mitigate risk, but also unlock a lot of the alpha opportunities. Today, the most dynamic growth area in emerging markets happens to be where the ESG practices can add value or [provide a] competitive edge.”

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—Liz Su, emerging markets portfolio manager, Boston Common Asset Management

“Governance was the most important factor explaining US stock returns from 1990 to 2009. Since 2013, the relationship has been a little bit less, but has not been a contra-indicator. The research would say that the S and G are as or more meaningful than E.”

—Herb Blank, a senior consultant at Global Finesse, citing numerous studies.

“Active contrarian ESG investors win. …The active asset managers rule, because as you know, [in] passive indexing, they can’t do any buying and selling, they’re just following the active asset managers who are doing the buying and selling. So, this actually increases the influence of active asset managers.”

—Hazel Henderson, president and founder, Ethical Markets

“We think of ESG and sustainability in a holistic way, it’s not about governance or environmental against social issues. All of them have a part to play in our risk management and alpha generation [strategies] in our sustainability portfolio.”

—Mariela Vargova, senior vice president, sustainability and impact investments, Rockefeller & Co.

“ESG is in their DNA. …This is the wave of the future.”

—Robert McGarrah, a corporate sustainability attorney, when speaking of millennials.

“We’re trying to take the culture of a company, turn into a score, feed into a risk model, and hit the button, and we’re told what to buy or sell. That is not what investing is about. …You have to do your homework. This industry is careening towards this idea that we can just [use] big data and it’s just not so. …We are all chasing the shiny data box and that’s just not going to deliver returns, it’s not going to manage risks because you’re not paying attention to the right things.”

—Bruce Kahn, portfolio manager, Sustainable Insight Capital Management

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