Although socially responsible investing is getting popular, in the future investors will no longer need a separate investment bucket for companies with socially responsible practices in place, says Columbia Threadneedle’s Ed Kerschner.
Instead, companies that have good returns and dividends will have good environmental, social and governance practices in place, says Kerschner, chief portfolio strategist for Columbia Threadneedle, a global asset manager with $467 billion in client assets.
“There are still people who believe you have to sacrifice returns to invest in socially responsible companies, but that has been proved false,” Kerschner says. Columbia Threadneedle’s investments that take ESG issues into consideration outperform the S&P average.
“ESG is going to go away eventually as an investment strategy and will just become part of a well managed company, but that is still a while away,” he adds.
Columbia Threadneedle has suite of ETFs that take ESG investing goals into consideration. ESG practices are a marker of good management, according to Columbia Threadneedle.
For now, investors need to do their homework to determine if companies have good ESG management practices. Kerschner suggests that advisors and investors look at ESG factors that are relevant to the industry being considered. For instance, water usage and treatment would be relevant to manufacturing companies, while child labor issues are important to investments in retail.
“Having good practices in place and being transparent to the public is the responsibility of each companies’ board of directors,” Kerschner says.