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Alternative Market Briefing

Hedge funds are encouraged to jump on the ESG bandwagon

Thursday, August 15, 2019

B. G., Opalesque Geneva:

How much sense does it make for a hedge fund to apply ESG criteria in its investments? It does make a lot of sense on two main counts: pressure from asset owners, and positive performance over the long term. Then there's also a moral imperative.

Environmental, social and governance (ESG) refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business.

Today, hedge funds still lag long-only funds in doing applying ESG standards. But many are about to launch their own ESG-compatible products, says Franz Odematt, senior portfolio manager at Crossbow Partners.

Why should they, if that could affect their returns and investment styles? Well, he says, recent studies suggest that investors do not underperform over the long-term if they systematically apply ESG criteria to their investment process. So one should not fear underperformance. And one might even benefit from an ESG momentum, as ESG moves from niche to mainstream and good companies experience increasing inflows, which should push the stocks.

One does not have to sacrifice returns when investing in a socially responsible portfolio, according to Jamie Broderick from the Impact Investing Institute. "Th......................

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