By Andrei Skvarsky.
An investment strategy where environmental, social and fair governance concerns are key factors could mean less money for an investor in the short term but can produce “attractive” returns in the long run, according to a top executive in London-based asset manager Alquity.
This strategy, known as “responsible investment”, is followed on an increasing scale, Suresh Mistry, director for Asia and the Middle East at Alquity, told EmergingMarkets.me in an emailed interview.
Alquity is among companies practising responsible investment. This makes it avoid doing business with firms that fail to comply with what are considered minimum acceptable environmental, social and governance (ESG) standards.
“Responsible investment in some shape or form has been practised for decades but in recent years there has been a major increase in its application,” Mistry said.
“This is due to consumer demand (driven by factors such as climate change and corporate scandals) and increasing evidence that responsible investment can help deliver attractive risk adjusted returns over the long term.”
What proportion of potential client companies does Alquity turn down as having failed to pass through its ESG filter?
“The proportion depends on the region but it is substantial,” Mistry said.
Alquity’s ESG analysis of firms and rating them on its own scale “can often exclude more than 20% of the investible universe”, he said.
“If a company fails our ESG grading or red flags at any stage, we would not invest in the first place or divest immediately if the holding is in one of our portfolios. We have numerous examples of this across our portfolios,” Mistry said.
Yet in spite of all this, Alquity is doing quite well. According to a report it published a few weeks ago, as of mid-2018 it had $425m under management.
This included a sum Alquity was overseeing under a segregated mandate from one of the largest public pension funds in the United States.
Alquity also makes regular charitable donations for purposes such as employability, microfinance and entrepreneurship.
The above-cited report said that, between its emergence and mid-2018, the company made donations that totalled $1.75m and “impacted the lives of over 60,000 people”.
On average, the firm donates $1,500 per working day, according to the report.
Besides, the company also runs a charity, the Alquity Transforming Lives Foundation, which prvides grants and other forms of financing in regions where Alquity invests.
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