According to one asset manager, sustainable investing is no different from conventional âvalueâ investing, as both focus on long-term returns.
âValueâ investing is a strategy of selecting quality companies that appear to trade below their intrinsic value and have the potential to do well over the long term.
Incorporating ESG factors can help investors find such companies, said Yimei Li, CEO of China Asset Management or ChinaAMC.
ESG – or environmental, social and governance – refers to a set of criteria used to measure a company’s performance in areas ranging from carbon emissions to contributions to society and employee diversity.
“I think the investment is [about] in search of the best quality-price ratio in the long term. And for fundamental investors, there is nothing more important than sustainable growth, âLi told CNBC Thursday at the Virtual Sustainable Futures Forum.
Last year, ChinaAMC partnered with Dutch asset manager NN Investment Partners to launch a global ESG-focused fund that targets Chinese equities. She said the fund had performed well and that over the long term, sustainable investments would not bring “bad” returns.
But ESG standards should adapt to local circumstances, Li added.
She explained that globally, governance standards generally insist on the presence of women on company boards, but this is “not that difficult to achieve” in China.
Li said his company has its own âlocalizedâ ESG rating to complement international standards.
Not a “simplistic filter”
Sustainable investing has become increasingly popular in recent years, but critiques of the investment strategy have also emerged.
A critical voice was Tariq Fancy, BlackRock’s first global investment manager for sustainable investing between 2018 and 2019. He said this type of investment can be a “dangerous placebo that harms the public interest”.
Singapore Exchange CEO Loh Boon Chye also recognized that there were mistakes associated with sustainable investing.
He cautioned investors against using ESG as a “simplistic filter” or “short cut” to select funds and companies. Instead, investors should assess whether a company incorporates sustainability into its business model and practices, he said.
âOne of the problems is that ESG or sustainable or ‘green’ is often used as a catch-all for different strategies, sectors and investments,â said Loh, who also spoke at the Forum. virtual reality on the sustainable future.
Companies that understand ESG risks and find ways to deal with them would be able to increase their long-term financial returns, the CEO said.