Despite the fact that the vast majority of institutional investors are now incorporating environmental, social and governance (ESG) investments in their investment decisions, there’s only a small percentage that see these socially responsible investments as having a positive effect.
A recent Natixis survey of 660 institutional investors worldwide found that 95% of them are incorporating ESG criteria in their investment decision-making and analysis.
However, the survey also finds that only 26% of the investors surveyed agree that incorporating ESG into investment decision-making has had a positive effect on their investment performance.
Natixis Global Asset Management exec Philippe Zaouati – who manages Mirova, the responsible investment subsidiary of Natixis – thinks this number is low, and he disagrees.
“If you look at what happened, for example, with Volkswagen,” Zaouati said during a visit to ThinkAdvisor’s New York office, “this is a clear example.”
Volkswagen’s stock plummeted after the carmaker admitted in September to misleading U.S. regulators about emissions. Since then, Volkswagen’s shares have lost almost a third of their value, or about 22 billion euros ($24 billion), according to Reuters.
“We were clearly not invested in Volkswagen, and the reason we were not invested with Volkswagen was clearly for ESG reasons,” Zaouati said. “And for two reasons: First one was governance. The governance rating of Volkswagen was very bad for understanding reasons. The other one was environmental topic. Just before the crisis, if you had looked clearly and compared Volkswagen to BMW to Toyota, it was crystal clear that some of them were really involved to committing to innovation and climate change. Toyota says, for example, ‘In 2050 probably there will be no commercial fossil fuel vehicle.’”
For these reasons, Zaouati’s fund invested in companies like Toyota and BMW – and “not at all in Volkswagen,” he said.
“This is clearly the kind of value-added you can have,” he said. “It’s not always the case. There are not thousands of examples, but it’s very difficult now to say that the ESG has no effect.”