Could the New Year be a watershed for environmental, social and governance, or ESG, investing? The head of Europe, the Middle East and Africa at Northern Trust Asset Management, Marie Dzanis, believes it will be.
“2019 is going to be the year in sustainable investing,” Dzanis recently told Bloomberg Daybreak: Europe. “This is a huge theme because on the back of market volatility in 2018, a lot of uncertainty, people want to make sure their personal values, their corporate values, match their investments.”
Dzanis admitted that numerous definitions of ESG investing exist. She said she and her colleagues spent a lot of time with clients explaining their vision for the sector.
But some themes recur, she said. European pension funds, for example, are increasingly from companies that produce tobacco and weapons, for example. Younger investors who clearly represent the future of finance are also more likely to consider ESG principles in their portfolios.
“The younger generation is important in growing impact overall,” she said.
She added, however, that food sustainability, recycling, fossil fuels and other issues are only now becoming more popular among mainstream investors.
Investors in the Middle East are slowly converting their holdings from fossil fuels to more sustainable investing, however, in part because they have been so over-leveraged in carbon.
The rise of factor investing could also potentially affect ESG investing, she added.
Factor investing is a strategy where traders identify macroeconomic issues like credit, inflation and liquidity or microeconomic characteristics of assets like management style. Taking those factors into account while adding ESG demands experience and aggressive management, she said.