"We also use thematic funds, such as renewable energy or water funds, for clients who may have that as a priority. The thing to be mindful of with those thematic funds though is they tend to perform differently [from each other] depending on the economic conditions.
"For example, renewable energy funds do well when the economy is doing well, whereas water funds tend to be more resilient to economic conditions. And those factors are important when considering a client’s attitude to risk.”
One of the challenges of investing in some of the non-environmental aspects of ESG is that it can be harder to quantify, or measure, factors such as social impact, which can also be more subjective.
Vincent Berard is head of product strategy at BNP Paribas' Theam Quant fund range. As the title of the range implies, they use quantitative measures to assess the investment case for stocks.
Berard acknowledges that assessing the social impact is more difficult, “but using the UN Compact rules, for example, on various aspects of ESG immediately eliminates 20 to 40 per cent of global stocks from an ESG fund, depending on the mandate.
"We also partner with transnational organisations who measure various social factors and provide data.”
david.thorpe@ft.com
