Although SRI investment styles have been around for a long time, ESG investment styles are sufficiently new that the market is short on benchmarks. For example, JAG is a social growth equity investor, and direct benchmarks for our investment style don’t really exist.
Hortz: What are you doing to bring more clarity and transparency to ESG investing?
Conley: JAG sees social progress as an essential and integrated element of our investment strategy. We do not think SRI or ESG investing will ultimately prove useful as an overlay or an add-on to an existing investment process. They will have to be fully integrated. We hard coded what we believe—social choices which improve financial returns will make investors more money.
At this stage in the evolution of social investing, JAG thinks we can set an example for the industry. We have started a process to bring more transparency to social investing processes through expanded thought leadership, sharing of research and increasing advisor/industry engagement. We believe that safety, conservation, and ethics are universal, achievable and measurable social outcomes. We would like to be part of educating advisors and clients to find this common ground.
Hortz: How would you recommend advisors with clients interested in SRI/ESG/Impact investing to best choose among these areas and what are the most important criteria to base their choices on?
Conley: For advisors with clients interested in SRI/ESG/impact strategies we suggest they might find their clients’ social inventing comfort zone seeking answers with them to these questions:
SRI—What companies would you exclude from investment consideration for social reasons?
ESG—Which companies have the best social characteristics in each ESG sector?
Impact—At which companies can I make a difference in social policy?
Separately, we have had several difficult conversations with clients about virtue signaling. Virtue signaling, by our definition, is when a corporation makes a socially popular decision which hurts the business. Here is one of many examples: Starbucks rejected plastic straws (socially popular) but replaced the straws with higher plastic content and more expensive lids (environmentally and financially negative). We believe that virtue signaling is the enemy of social investing, and we endeavor to gather support to oppose socially popular, financially negative corporate decisions.