Long-term earnings advantage Michael Herskowicz, Global Head of Stewardship, BNP Paribas AM
BNP Paribas Asset Management (AM) believes that the full integration of ESG aspects into investments will certainly generate excess returns in the long run. It also has the effect of keeping earnings fluctuations low.
Since it is a long-term investment concept, investment results should not be considered in the short term of, say, six months. It's not a discussion about what stocks are going up in the near future.
Based on these ideas, we integrate all of our assets under management with ESG considerations. It can be roughly divided into two aspects.
The first is ESG integration, or incorporating environmental, social, and corporate governance perspectives when deciding whether to invest. The other is to encourage improvements in environmental, social and corporate governance. This ESG engagement is integral to fulfilling managerial responsibilities and plays an important role in increasing returns.
It evaluates and rates 13,000 companies worldwide from an ESG perspective. It is also important to analyze the sector in which the company belongs. This is because different industries face different ESG issues.
ESG investing can be a force for change in companies. For example, decarbonization. By exercising voting rights, asset management companies can encourage the transition to a net-zero greenhouse gas (net zero emissions) society.
After Russia's invasion of Ukraine, the stock prices of energy companies such as coal and gas performed well. But that doesn't make Transition less necessary.
The trend of incorporating ESG as an essential element in investment will continue. Managers need to hone their expertise and refine their investment strategies.
ESG investing will move toward less ambiguity and greater transparency. We must also standardize the content and methods that companies should disclose to investors. Asset management companies should also be actively involved in creating a disclosure framework. Dialogue with officials who decide market policies is also essential.
