Market Insights

With a 20-year history in ESG investing, Dana was one of the earliest entrants in the space. It all started with a request from a group of nuns.

Dana’s ESG story began at the tail end of 1999. We were working with a group of nuns who needed equity exposure. This group held zero equities in 1999, so we got them comfortable with moving into holding stocks, but they had some values-based controls that they wanted to place on their portfolio. They wanted their investments to align with their Catholic values, so they didn’t want to hold alcohol, tobacco or firearms companies. They needed to be sure there were no pornography publishers among their holdings. They’re nuns. It was a must for them and we understood.

At Dana, engagement remains a core tenet of our ESG investing philosophy. We know clients don’t just want us to evaluate the risks a company faces due to environmental, social and governance issues, but to push companies, industries and governments for improvement. For larger-scale issues, these efforts are often more effective when a group of investors works collaboratively.

Over our 20+ year history in ESG investing, we’ve seen interest grow considerably, particularly in the past few years. As part of our own stewardship efforts to raise awareness, we have tried to arm advisors with the tools they need for their own practice, including items that could educate their clients on ESG investing.

With billions flowing into the ESG and sustainable investing universe, investor interest is clearly growing. But what drives that interest varies and has a direct impact on which strategy is right for each investor.

Incorporating environmental, social and governance (ESG) factors into investment analysis can identify risks and opportunities in the market. But investors desiring to improve the world around them must go a step further. Engaging with companies to address ESG issues plays an important role in creating a sustainable future.

This year, we’ve been impressed by progress on the engagement front, as key shareholder initiatives driven by Dana and other investors will force transparency at one of the world’s largest energy firms: Exxon Mobil. This blog looks at that engagement effort, and its implications.

Environmental, Social and Governance investing has grown considerably in the past five years, but there’s more than one inroad leading clients to the space. Is it a desire to improve the environment? A chance to address social justice issues? Or does your client see ESG primarily as a pathway to potentially better returns and less risk?

During a career that has spanned more than 20 years at Dana Investments, portfolio manager Duane Roberts has seen management teams’ attitudes toward ESG (Environmental, Social, Governance) issues change considerably. In a brief interview, he reflected on how the tenor of management teams has changed, particularly in recent years. Excerpts from that interview follow:

Confused by all the various ESG nomenclature? You’re probably not alone. By some counts, as many as 80 different terms are used to define ESG investing. ^*

Amid the alphabet soup, advisors can establish themselves as a trusted guide for interested investors. Our newest ESG FAQ can help.

Are ESG strategies more about the companies you avoid, or the companies you change? It’s a key difference among ESG funds, and could be a key difference in what your clients want from ESG investing.

Some strategies are focused more heavily on exclusionary investing – using ratings and screens to “weed out” companies that have a heavy carbon footprint or score poorly on other social or governance metrics. Simply avoiding those companies may in fact be the approach your client wants.

As more assets flow into ESG strategies, the space has had an impact on several facets of society, with a new mega-trend every year. In a recent call with clients, Portfolio Manager Duane Roberts reflected on where ESG trends have already taken us, and where they are going:

Duane Roberts: “I'll go back three years, and it seems like every year there's a new theme in ESG. Three years ago, it was transitioning away from fossil fuels and what's the pathway to get there, and how does our portfolio align with those projections, and are the companies in the portfolio making the changes necessary. Last year for some fairly obvious reasons, diversity equity, and inclusion, which was always a subject of concern for ESG, jumped from being one of the topics to being the top topic.