“As the interest on ESG investing grows among the asset management industry, it becomes increasingly important - and difficult - to define what the acronym really means.

ESG investing seems to be a term often misused and even mis-sold, says Sébastien Thévoux-Chabuel, portfolio manager and ESG analyst at the French investment house Comgest.”


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SEQVOIA's viewpoint:

This article throws light on a really interesting – and challenging – investment topic. We know from data and from surveys that nearly all investors, both retail and institutional, take an active interest in ESG issues. However, many do not actually put their money where their heart is. There are many reasons for this but, in particular, there is mounting evidence that investors are confused about what ESG means in an investment context.

The fund industry must take its share of the blame for this. Few ESG-labelled funds are crystal clear about their investment philosophy and how they implement their ESG strategies. We have no problem with the fact that ESG means different things to different people, but fund managers must be clear what ESG means in terms of the assets their own funds hold.

Comparability between ESG funds will always be difficult because of differing philosophies, but investors must at the very least be able to select a fund which matches their beliefs. Investment returns are about numbers, but for ordinary investors understanding a fund’s objectives requires words to describe those numbers. In short, funds must become better at “telling the story”.

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