ESG investing shifts to focus on sustainable drivers for structural growth, portfolio manager says

Well, we very much think that you need to be active in these. You need to be thinking on does that management team, you know, deserve the, the pay package on proposition and you know, have they delivered on what they said they would do? Are they making the best capital allocation decisions for shareholders? And I think you need to think beyond, you know, being a passive investor and really saying, well, I want my active managers to be thinking about these, these elements and, you know, really getting management teams in place that will deliver those sustainable, durable kind of decisions that set your business up for the future. Last week, I think the headline story really was around Elon Musk and his enormous pay package, the $56 billion. We're not just talking about someone who's managing a business here. We're talking about someone who's creating value, creating technology, bringing that into the business. Is he just in a different category when it comes to what he can bring to an organization versus a typical CEO? Well, I think it's very difficult to draw from one person, one individual, one company into broad market generalizations. But I do think that's part of thinking about the broad stakeholder kind of allocation of. Of of company business, company activity and thinking, you know, well, what is the company doing? What value are they bringing to address sustainability challenges, to drive technology forward, to think about their employees? These are all elements of of non financial data that there's real potential investment edge to bringing into your investment case. So it's thinking beyond just the numbers that are in P and LS and balance sheets and saying, well, actually, there's more to what makes a company likely to deliver a long term value creation, bringing those into your investment case and then delivering, you know. Genuinely differentiated return. On the back of that, let's talk about the letters than. ESG was such a big theme in the market, some are comparing it to a tech bubble. That it was actually an ESG bubble, but now we're talking about AI more than we're talking about ESG. So was it just a face? I, I think we're kind of in the third iteration of thinking about ESG investing. So the first approach was to think of it very much as exclusions. So avoid, you know, tobacco, avoid oil and gas, etcetera. The 2nd iteration was much more focused on ESG scores, so overweighting the higher ESG scorers and an underweight in the lowest J scores. But neither of those two approaches are focused on alpha generation. What we're seeing now is more of an approach to say, well actually we want to build differentiated portfolios and we want to build portfolios where the companies, you know really incorporate non financial data but also incorporate sustainable drivers of structural growth. That's the area where we're building differentiated portfolios that can be a real compliment to core equity investing.