I moderated a panel back in October at the Responsible Business Conference and wanted to share a few high level ‘aha moments’ for the quants working on ESG and responsible investing strategies.
I’m pretty sure that I was the only quant in the room.
Although many quants are very engaged in ESG investing, I was surprised to be the only one at the conference because there were so many insights being shared by the presenters.
More so, there must have been no more than 5 buy-side and asset-owners combined in the room with several hundred attendees.
It’s not because ESG is not hot - it is. It’s because things typically occur in silos. Quants go to quant conferences. Fundamental investors to fundamental conferences. ESG investors go to ESG conferences. And CSR professionals go to CSR conferences.
This one was a CSR conference. Many Chief Sustainability Officers of public companies presented. Many ESG Standards Agencies presented. Almost no ESG Data companies and buy-side investors presented.
It was a very fresh experience from the quant perspective. We could learn so much if we start attending the out-of-silo conferences - creating conditions for creativity and innovation.
Just like ‘typical’ buy-side firms have an ‘ESG’ person, companies have a ‘CSR’ person.
Their degree of influence ranges from “no-one listens to what I say” to “I make real business decisions for the firm”.
Some sustainability officers run business departments like Procurement. Others come from Investor Relations and Risk.
Some focus on CSR integration, others on CSR as a strategy.
Effective CSR in companies is about getting a few strategic issues right. Current ESG in quant is about getting a lot of issues vaguely right.
A lot of the issues that companies are talking about focusing on are not yet measured by the quants.
Either the data is so aggregated that it doesn’t reflect these issues at the final score level.
Or the data is so granular that quants haven’t gotten down to that level yet.
Or the data does not exist yet.
The Rate of ESG-fication in companies is accelerating.
Standards are evolving and getting more and more codified. The ‘piping’ is being developed for the long-haul.
“Circular & Sustainable” is becoming the next “Organic.”