How to pick an ESG fund
By Jassmyn Goh, 27 Jun 18
The rapid growth of environmental, social, and governance (ESG) based funds can make hard to figure out which funds are truly incorporating the three elements, and which are satisfying requirements on a surface level. Click through the gallery below for a series of fund selector tips on the best ways to pick an ESG fund.
“At the end of the day ESG is qualitative because for one investor one company would be considered ESG compliant but for another it won’t be, so it is all qualitative,” he said.
The Geneva-based selector gave an example of an ESG fund that invested in Wells Fargo and continued to invest after the bank’s account fraud scandal that saw 5,300 employees fired and a new chief executive on board as the firm showed it was willing to improve.
Following this in mid-2017 the bank was caught charging more than 800,000 car loan customers for auto insurance when they did not need it.
Trotignon said the fund manager met with the new CEO and was convinced of the new plan to change the bank.
However, earlier this year the Federal Reserve punished the firm for its fraudulent activities and has capped Wells Fargo’s capital growth.
“While it was definitely controversial that the fund manager wanted to hold the position during the scandal, the manager believed there was room for improvement. But then got rid of the Wells Fargo holding after the Federal Reserve decided to cap its growth” Trotignon said.
“Even after one problem you might think that things can get better and keep investing. But if another thing arises and even if you believe in the quality of the company at the end sometimes it’s better to stay away from those kinds of companies.”