It’s rare to gain access to diverse opinions on sustainable finance and ESG investing from highly informed sources all in the same room. The CSFI Breakfast on Sustainable Finance this week played host to multiple guests representing industries ranging from shipping, banking, asset management, media and research groups. The result was a genuinely educational ninety minutes in which points of view were freely presented and productively discussed. Panellists included leaders of sustainable finance research groups, heads of responsible investment at asset managers and index providers.
Problems posed to investors by a lack of company disclosure on ESG were reiterated but discussed in the context of what is now being done to mitigate their effects. But issues with categorising and structuring useful datasets still remain, especially given their scarcity. What was not mentioned was the potential for hedge funds – perhaps uniquely positioned in this context– to act decisively on ESG matters by using the active investment tools at their disposal, including the short selling of stocks identified as non-ESG compliant.
The EU taxonomy was discussed in depth, but regulatory harmonisation and its potential to result in greenwashing will remain problematic. Given that sustainable finance and responsible investment are relatively new and still changing, it makes sense to ensure any regulation avoids limiting its growth. Also, especially in the hedge fund space, responsible investing may not be applicable to some strategies such as those used in quant-based firms.
Sapience looks forward to the next event and to discussing our own findings on sustainable finance and ESG investing.