ESG Funds
Have the opportunity to start working as an analyst on an ESG focused fund that invests in a blend of PE, RE and Infrastructure.. To be frank, I know very little about the specifics regarding ESG, but am very familiar with PE / RE . To those of you that have exposure to this asset class, I have a few questions..
A) How do you enjoy it?
B) Do you feel the environment is growing? From the outside, think yes.. but curious how it feels on the inside.
C) If you wanted to lateral out, do you feel you would have ample opportunities.. either at similar funds or switching out of ESG related?
D) Is comp in line with other non-ESG related asset classes?
Appreciate any and all insight you might be able to provide, kinda swimming in the dark here. Many thanks.
Can't comment on comp or career. But as a retailer (FA), ESG is becoming significant with lots of attention thanks to the cancel culture. Used to be a few "socially aware" funds that claimed to not invest in XYZ. But now major AM shops (PIMCO, Blackrock, etc) are focusing large resources to that, and as a result, effecting change at the issuer level. Company X has to operate a certain way, add X number of board seats to minorities, become carbon neutral by 20XX if they want the largest institutional players to lend them money (create capital) for their projects. Used to hate that. Evolving my thinking. Maybe it's not so bad to build accountability into capital creation.
I would add that lots of institutional investors (ie state pensions) are looking for it and investment consultants are pushing firms to be ESG friendly, so a part of it is managers responding to client demand
Appreciate the response from the other side. Demand is definitely there and growing... hoping it's only a matter of time before the other side starts responding accordingly... not sure if smart career move on my end.. leaning yes
Where you are looking - RE, infrastructure, PE - I think you have more of a chance at getting exposure to impact investing or other types of strategies/opportunities, so to speak, that might be beneficial for you. Certainly more interesting than the next money market fund iteration from BlackRock or the like. I don't think there's much value in that unless you are a sales guy, looking for something to slot in.
From the inside - it's like the gold rush. Everyone is rushing things into market, there's differing information everywhere - sometimes you agree on what goes into the 'S' under ESG, other times it's not. There's also a host of headaches that come with it - UN PRI, more transparent reporting, constantly changing requirements and/or preferences, wild west of categorizations or terminology, etc. I'm going to avoid being cynical about it - no matter what you think of it, like you said demand is there. In spades.
It's by no means a 'major' portion of our business - but we have seen traction, and I think that many institutions are grappling with how to implement it, whether they should and/or how their fiduciary capacity lines up with some of these decisions. There is a desire for more custom, thoughtful approaches that lineup with specific stakeholder interests - it's not always enough to simply buy an ESG domestic equity fund and call it a day. That might be part of the solution - but if I'm, for example, a community foundation I'd argue there are better ways to integrate sustainability into your investment program. Maybe carve out a portion of the fixed income to function like private debt, if you are large enough, to make loans back into the community or find a proxy that does that. Point is - there's some interesting stuff to be done in the space.
Institutional demand is a fickle animal though - it's there now, some of it forced and others by choice. Bull markets help a lot - when your endowment/pension/whatever is going up at 10-15% a year... your eyes can wander. There's considerable risk as well, when you start excluding things or including specific things based on preferences - watch out. Either way, I do think it would be interesting to spend some time in that world - if nothing else, to get a front row seat into how a 'new ish' strategy grows, adopts and is rolled out or analyzed.
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