Controversial opinion on here but these are already directly related.
ESG investing is investing. There is no difference. ISS reports or whatever ESG ranking de jure actually hinders that process because it tries to quantify and simplify something that is inherently complex (and btw, ISS do this with their other products, their proxy service exists because ETFs don't want to actually do hard work and think about how they should vote their shares...it is anti-capitalism, rewarding sloth). It is like China's "social score" system...it is identical.
I worked in this area, I met many fund managers (and worked in equity research myself). When people talk about fund managers not doing ESG work, that is because some fund managers just don't bother doing any research at all. ESG was a critical component of investing before the term ESG existed, it isn't possible to value a company without considering the value that company generates for customers, workers, suppliers, the communities in which they operate.
Also, one of the key points on this actual subject is that impact is ambigious. There are competing notions of impact and good. The number of companies that openly embrace criminality is, thankfully, quite small. In every other case, you have a company that is providing a service, someone else pays for it and you have to make a judgement, there is no magic formula...often, these conclusions are counter-intuitive. As an example, bookies...gambling is awful, you hear lots of poor people do it and waste money...where I am, we have public health, and the only people funding gambling addiction are bookies. In countries where gambling is illegal, there is no funding, and the addiction isn't recognised or treated. Sometimes you have a gambling govt monopoly, like HK, which drives people into illegal forms of gambling. So it is unclear that impact is negative (the issue is that gambling addiction actually exists, and ppl will gamble whether it is illegal or not) without actually doing research, beyond a simple: gambling = work of Satan (btw, this applies generally...the growth in ESG investing is correlated to a growth in moral Puritanism).
Honestly, it is a little unfortunate that people have gone so deep into ETFs and ESG ETFs...active funds do this work, they won't necessarily align with your own system of ethics but it is a totally and complete fiction that investors do not consider impact beyond profits, and that some ESG/quant approach is the solution. I have never come across a manager who doesn't consider impact when doing research. And any quant approach I have seen is totally and completely deficient (there is no incentive to do the work properly) if you actually care about values.
ESG investing is investing. There is no difference. ISS reports or whatever ESG ranking de jure actually hinders that process because it tries to quantify and simplify something that is inherently complex (and btw, ISS do this with their other products, their proxy service exists because ETFs don't want to actually do hard work and think about how they should vote their shares...it is anti-capitalism, rewarding sloth). It is like China's "social score" system...it is identical.
I worked in this area, I met many fund managers (and worked in equity research myself). When people talk about fund managers not doing ESG work, that is because some fund managers just don't bother doing any research at all. ESG was a critical component of investing before the term ESG existed, it isn't possible to value a company without considering the value that company generates for customers, workers, suppliers, the communities in which they operate.
Also, one of the key points on this actual subject is that impact is ambigious. There are competing notions of impact and good. The number of companies that openly embrace criminality is, thankfully, quite small. In every other case, you have a company that is providing a service, someone else pays for it and you have to make a judgement, there is no magic formula...often, these conclusions are counter-intuitive. As an example, bookies...gambling is awful, you hear lots of poor people do it and waste money...where I am, we have public health, and the only people funding gambling addiction are bookies. In countries where gambling is illegal, there is no funding, and the addiction isn't recognised or treated. Sometimes you have a gambling govt monopoly, like HK, which drives people into illegal forms of gambling. So it is unclear that impact is negative (the issue is that gambling addiction actually exists, and ppl will gamble whether it is illegal or not) without actually doing research, beyond a simple: gambling = work of Satan (btw, this applies generally...the growth in ESG investing is correlated to a growth in moral Puritanism).
Honestly, it is a little unfortunate that people have gone so deep into ETFs and ESG ETFs...active funds do this work, they won't necessarily align with your own system of ethics but it is a totally and complete fiction that investors do not consider impact beyond profits, and that some ESG/quant approach is the solution. I have never come across a manager who doesn't consider impact when doing research. And any quant approach I have seen is totally and completely deficient (there is no incentive to do the work properly) if you actually care about values.