Reflections on an article by Dave Zellner, CIO of Wespath Benefits and Investments
Environmental, social, and governance (ESG) funds have been drawing considerable attention lately in the press and in the investment community, much of it negative.
Some investors and pundits have called into question the veracity of vehicles purporting to pursue ESG, accusing them of ‘greenwashing.’ In a recent tweet, Elon Musk said ‘ESG is a scam.'
Others have become concerned about perceived conflicts between ESG approaches and the fiduciary duty of those who invest in them on behalf of others.
Others still have complained that ESG investing has become a tool of the political left. Recently, the Christian faith-based exchange traded fund provider Inspire Investing removed all environmental, social and governance labels from eight of its ETFs – without changing anything related to their strategies – in order to distance itself from the term, which it perceived to have been ‘weaponised by liberal activists’.
While much angst pervades the conversation about ESG these days – what it really means, and how investors should approach funds purporting to advance ESG principles – FaithInvest's Board Chairman Dave Zellner, Chief Investment Officer of Wespath Benefits and Investments, takes a more level-headed view in an article that appeared in Top1000funds.com, a market leading news and analysis site for the world’s largest institutional investors.
In the article “ESG” strikes a nerve, why it shouldn’t, Zellner is clear that: ‘For Wespath, sustainable investment practices, those that consider the risks and opportunities related to ESG factors, have absolutely no relevance to any political affiliation.'
Zellner sets out the unique approach taken by Wespath, which manages over $29 billion in assets (as of Dec. 31, 2021), explaining 'we accept the validity of some anti-ESG critics who point to oversimplification or overpromising related to ESG' but ultimately, 'we strongly believe long-term investment success requires a sustainable global economy.'
To this end, Wespath pursues a sustainable economy framework based on three pillars: social cohesion, which means people around the world have reliable access to necessities; long-term prosperity for all, which describes the concept of equality of opportunity—be it equal access to quality jobs and healthcare, or equal opportunity to participate in global financial markets; and finally, environmental health, which relates to the development of resilient ecosystems and the mitigation of climate change.
In the article, Zellner argues that there are plenty of sustainable investment issues that need not be viewed as political. 'Community development loans that serve families, seniors, veterans and individuals with special needs…are issues that we all can support.'
Zellner goes on to address other critiques of ESG, such as the generalisation that all ESG is anti-fossil fuels, explaining 'Fossil fuels will play an important role in fulfilling the world’s energy needs for some time. We know abandoning the fossil fuels sector would cause undue hardship on broader global society. To that end, Wespath does not support wholesale divestment from the fossil fuels sector, but instead we seek to use our influence as a shareholder to enact change within oil and gas companies.'
In terms of the critique that ESG fees are high and performance low, Zellner expresses that view that integrating sound sustainable investment practices will add long-term value to investment portfolios. Further, he notes that Wespath does not use third-party ESG scores in its sustainable investment strategies, instead choosing to apply the firm’s more holistic Sustainable Economy Framework as its core methodology.
Zellner closes his piece by conveying Wespath’s contention that 'integrating ESG considerations through our Sustainable Economy Framework is about addressing material systemic risks that threaten a robust and thriving global economy' and that 'through action, investors can create and support a sustainable global economy, one that delivers healthier financial markets, more resilient companies and greater financial security for various stakeholders.'
Looking past the name ‘ESG’ to the objectives and urgent actions needed to address today’s critical issues is clearly being given thoughtful consideration at Wespath.
For the full article “ESG” strikes a nerve, why it shouldn’t click HERE