A Fair Question for ESG Managers
With billions pouring into ESG strategies, asset managers are suddenly (and unsurprisingly) on board. Everyone has an ESG strategy, or purports to incorporate ESG factors into their analysis of a company.
This can make it tough for anyone conducting due diligence on ESG strategies to decipher which ones are truly rooted in ESG principles, and which asset managers truly believe it can affect a stock’s performance. Here’s a fair question to ask managers to see where their conviction lies: How did you decide that ESG is important to analyzing a company.
For Dana, we believe we’ve come by ESG analysis honestly. Long before ESG was on trend, we ran ESG portfolios for select clients, then quantitatively discovered that these factors matter to performance. In a recent audiocast, our CEO, Mark Mirsberger, discussed our history in ESG investing, and how it became ingrained in our investment process:
“We launched our institutional, large-cap strategy in 1999 and have had a very successful record. But early, mid-2000, we were asked by some Catholic nuns if we could screen the portfolio for some of their values. And then a few years later, we were asked by some other clients to broaden that to more of a secular ESG (tilt).
“We did that for them, and within about three or four years, we realized that the results - even for size weighting and a few other stylistic changes - were better for our ESG strategy than our large-cap strategy. After analyzing that, we really saw the benefits of governance initially, just buying companies with better governance helped returns.
"After that, as the data became more and more prolific, we built an entire ESG quantitative model that really allowed us to add research to all of our fundamental security research. Now, we view ESG as an extension of all of the research we already do. We basically have built a parallel ESG quantitative model as well as an ESG fundamental piece. And, we’ve added a lot of research that is unique to that area … Glassdoor, Spring Pond, things that are looking at employee satisfaction, things that are looking at company culture. We've got another source that's looking at artificial intelligence to see within these companies, what are the most commonly-viewed ESG topics and concerns.
“So, it has become the buzz, and everybody these days, it seems, is coming out with a strategy in the area. But we can really point back all the way to 2000 when we started integrating faith-based and ESG strategies. And now, it's just become mainstream into all the strategies that we manage.”
To hear more about our history in ESG investing, or other aspects of our investment process that we believe make Dana unique, we encourage you to listen to the full audio cast: What Can Dana Help Solve for an