Jason Mitchell is Co-Head of Responsible Investment at Man Group. Besides having managed environmental and sustainability strategies, he speaks and publishes widely on responsible investment (publications include the Institutional Investor, Wall Street Journal, CNBC Squawk Box and Responsible Investor). He contributes to multiple advisory groups including the European Financial Reporting Advisory Group, SASB Investor Advisory Group and the CFA Institute’s ESG Technical Committee.
He is a contributing author to the CFA UK’s Certificate
in ESG Investing Textbook and Responsible Investing:
A Guide to Environmental, Social, and Governance Investments.
Importantly, Jason hosts an award-winning podcast series, A Sustainable Future which Re:Co is a big fan of!
In this episode, Jason discusses the definition of responsible investment, common misconceptions about ESG, the frontier of ESG data analytics, the role of regulation in this nascent practice and much more.
Defining Responsible Investment:
Responsible Investment includes three broad approaches which are not distinct categories - at times they overlap. First, you have exclusions based approaches which are about screenings. Second, you have ESG which is about metrics. The third category is about impact which is more about intentionality [aiming for environmental or social outcomes] and additionality [achieving outcomes that would not otherwise have occurred].
Defining Responsible Investment:
Responsible Investment includes three broad approaches which are not distinct categories - at times they overlap. First, you have exclusions based approaches which are about screenings. Second, you have ESG which is about metrics. The third category is about impact which is more about intentionality [aiming for environmental or social outcomes] and additionality [achieving outcomes that would not otherwise have occurred].
There are two main ‘tracks’ to integrate ESG into investing strategies:
The two main ‘tracks’ include ‘bottom up’ and ‘top down’ approaches: ‘Bottom up’ is when a portfolio manager that is managing a concentrated portfolio of companies uses financial and non-financial/ESG considerations to understand risk and opportunities (this includes engaging management, proxy voting, etc.). ‘Top down’ is the quantitative perspective on ESG integration where you have potentially hundreds of securities or issuers, rather than 30 or 40, and apply constraints to this wider portfolio using climate or ESG data. For example, you could skew the portfolio toward companies with higher ESG scores.
Common misconceptions in ESG investing relate to performance:
There is a common misconception in the investment industry that there is a direct line between ESG performance and ‘alpha’ or outperformance. The industry needs to step back and be self critical about what this means. We only have about 10-12 years of data which makes it difficult to make a strong claim about ESG outperformance. Part of this has to do with how difficult it is to isolate ESG from other factors like the size of a company or healthy free cash flow.