Thursday, January 27

The 3 winning strategies of ESG funds

Álvaro Ramírez Blanco, executive sales de JP Morgan AM, details for the School of Finance of the Investment magazine what does it consist of investing in ESG funds: “They are those vehicles that invest with environmental, social and governance criteria.”

Álvaro Ramírez, from JP Morgan AM, gives the keys about the winning funds in ESG (video: Inversión magazine / Escuela de Finanzas).

If this necessarily implies giving up profitability, Ramírez Blanco clarifies. If not the opposite. “Since we understand that those companies that have a sustainable business model and have good corporate governance are candidates to do better than their competitors.”

Or what is the same, obtain higher long-term profitability.

What do we mean when we talk about this type of fund? The executive sales of JP Morgan AM points out that it consists of “The inclusion of material ESG factors in the investment process”.

To do this, it begins with the analysis of the companies “through the selection and investment of those companies where we are going to invest.”

The final stage would consist of controlling and monitoring those companies in the portfolio.

ESG fund strategies

According to the different levels of ESG investment different strategies can be designed.

The first strategy would be to exclusion of certain companies or sectors based on certain criteria. “An example would be the exclusion of the tobacco, arms or pornography sector,” says Ramírez Blanco.

The second level would be ‘best in class’, which refers to those strategies that invest in those companies that have obtained a rating in ESG factors better than that of the rest of their competitors.

And, finally, there would be the strategy of the thematic investment, which refers to those strategies that exclusively invest in issues related to some ESG factor.

“An example of this would be investments in the health area or investment in low-carbon companies,” Ramírez Blanco clarifies.

In short, “we understand that ESG funds are perfect for those long-term savers who not only seek profitability, but also seek to obtain a positive impact on society, the environment or governance,” concludes the JP Morgan expert. A.M.