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Performance is the guiding star in ethical investing, says Cerulli

Chris Hamblin, Editor, London, 30 March 2015

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Asset managers are having to bow to the growing pressure for socially responsible investment, but where principles and strong fund performance clash the latter will usually prevail, according to Cerulli Associates.

The latest issue of the Cerulli Edge-European Monthly Product Trends Edition paints a picture of 'best practice' giving way to expediency. In it, the Boston-based analytics firm says that environmental, social, and governance (ESG) criteria, unlike outright ethical considerations, are more concerned with making systematic, quantifiable assessments of the financial consequences of an investment than judgements about what is morally "good" or "bad". ESG encompasses issues such as whether companies have sustainable business models or whether their performance could suffer because they do not have the right mixture of people in their boardrooms.

"ESG has become a 'hygiene' factor - no-one notices when it's done right, only when it goes wrong and funds are found to be investing in the 'unacceptable'," said a Cerulli analyst.

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