It’s Just Good Business: Using ESG in the Investment Process
Incorporating sustainability analysis in an investment strategy may help uncover opportunities and avoid potential risks.
We offer a range of funds and strategies centered on the belief that ESG factors can play a meaningful role in uncovering opportunities, identifying potential risks, and generating competitive returns for investors. Learn more by downloading our ESG Capabilities Brochure.
ESG 101“ESG” is a general term that covers a variety of investment approaches. ESG strategies factor environmental, social, and governance considerations into the investment process, with the goal of generating long-term, sustainable returns for investors.
- Environmental – Renewable energy, lower carbon emissions, water management, pollution control
- Social – Labor practices, human rights, data protection, selling practices, corporate supply chains
- Governance – Board makeup, corruption policies, auditing structure
Considering ESG criteria can help portfolio managers identify companies capable of creating sustainable value and managing a full range of risks. All else equal, well-run companies with sustainable business models may be better long-term investments. For these reasons, the investment criteria inherent in ESG analysis may be well-aligned with the interests of long-term investors.
6 in 10 investment professionals
agree there is alpha2 to be found in sustainable investments.3
Nearly two-thirds of institutional investors
believe ESG will become an industry standard within the next five years.4
75% of retirement plan participants
say it's important to make the world a better place while growing their personal assets.5
Screening securities on ESG or values-based criteria
Incorporates ESG factors into fundamental analysis to pursue alpha and mitigate risk
Investment selection guided by ESG themes and positive impact
2 A measure of the difference between a portfolio's actual returns and its expected performance, given its level of systematic market risk. A positive alpha indicates outperformance and negative alpha indicates underperformance relative to the portfolio's level of systematic risk.
3 Natixis Investment Managers, Global Survey of Financial Professionals conducted by CoreData Research in March 2018. Survey included 2,775 financial professionals in 16 countries.
4 Natixis Investment Managers, Global Survey of Institutional Investors conducted by CoreData Research in September and October 2018. Survey included 500 institutional investors in 28 countries.
5 Natixis Investment Managers, Survey of US Defined Contribution Plan Participants conducted by CoreData Research, January and February 2019. Survey included 1,000 US workers, 700 plan participants and 300 non-participants. Of the 1,000 respondents, 503 were Millennials (age 23-38), 249 were Gen X (age 39-54) and 248 were Baby Boomers (age 55-73).
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.
The ability of an active investment to achieve its objectives will depend on the effectiveness of the investment manager.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed-income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.