Zin Bekkali, chief executive officer, Silk Invest — a London-based advisory firm that invests in listed equities across Global Frontier Markets — predominantly in Africa, the Middle East, Frontier Asia and Latin America - with a strong focus on impact investing and has been a signatory to the UN Principles of Responsible Investing since 2011.

Venk Reddy — founder and chief investment officer, Zeo Capital Advisors — a minority and woman owned, San Francisco-based fixed income investment manager focused on short-term corporate debt and ESG high yield. ] 

Hortz: What has been driving such substantial inflows into sustainable funds?

Sage: Ultimately, the acceleration of inflows into ESG investment funds was and continues to be due to three factors: first, the continued trend toward values-based investing, which has been spurred further by the Covid-19 and oil crises this year. Second, the breadth of investment options has reached critical mass — the average investor now can access a much wider and growing range of ESG-focused investment choices in the public funds market. Lastly, investors now have enough of a sample size to judge how ESG-oriented strategies perform in both euphoric bull markets and deep bear markets.

Appleseed: ESG does seem to be getting special attention. I believe many investors are seeing the value in allocating capital to more structurally sustainable industries (avoiding fossil fuels) and to management teams that are focused on creating broader value over the long-term. The pandemic laid bare some really poor, near-sighted, self-serving decision making on the part of management teams (for example, sacrificing the balance sheet for buybacks, etc.). I think investors saw this and are making conscious decisions to avoid companies with that kind of management.

Cornerstone: Inflows to sustainable investment strategies are likely a reflection of the flight to quality we often see in times of great uncertainty. We would argue that the systematic analysis of material environmental, social and governance (ESG) factors represents an enhanced analytical lens for investment research. The predictive insight that can be gained represents an edge in the investment process. Further, this analysis of corporate governance allows us to have a “proxy” for quality. It also gives us a proxy for innovation, productivity, and resilience.

Essex: We think that this broadening interest in ESG is due to a number of factors, with the most important being performance and establishment of track records. Growing awareness of issues such as income inequality, global health, and climate change, particularly among younger generations that are reaching the earning and saving stage of their lives, has driven increased interest in the sustainability, ESG and clean energy funds.

Hortz: Can you explain for us how a multiple bottom line approach to running a company and its resources can help determine the future prospects and value of a company?

Appleseed: I think this approach helps to de-risk a company. There is always uncertainty with any business, but knowing that management is listening to shareholders, prudently managing the firm’s balance sheet, and thinking about the broader effects of their business on society should give investors more confidence in the long-term success of a company. This should lead to a lower cost of capital when valuing a company.

Silk: Social impact and ESG policies are critical for achieving long term sustainability and almost always are a positive for companies’ cash flows. In some cases, companies may on the short term need to sacrifice some profits but long term it always adds to the company’s profits as they build better relationships with all stakeholders including customers and employees. Companies with strong sustainable models will be recognized by clients and companies with better HR policies should be able to get better and more motivated employees. So essentially the multiple bottom lines eventually converge to one.