Why investors should care about ESG trend in US equities

Investment Talks

US ESG (Environmental, Social and Governance) investors are increasingly likely to benefit as the country’s companies close the gap with best-in-class global companies on ESG disclosure and performance. The trend towards ESG in the United States is being driven by asset owners demanding ESG integration into corporate business strategies, investors using it as a source of alpha1 , and regulators looking to formalise ESG into its rules and protocols. A growing body of empirical evidence suggests that companies with improving ESG momentum have been correlated with positive risk-adjusted returns. These ESG improvers are companies with solid business fundamentals that are demonstrating positive momentum in addressing ESG risks and opportunities. We believe that an investment focus on firms, combined with an emphasis on sustainable, high-quality business models, can potentially uncover unique sources of alpha and deliver consistent outperformance for active equity investors.

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