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Busting Three ESG Investing Myths
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(Posted March 1, 2018 - External Site)

Four Myths About Social Investing

MYTH 1: Corporate social responsibility comes at the expense of profit

  • most programs are designed to identify companies that address social issues as part of their strategies to be more competitive in the marketplace.

  • most programs believe that companies can improve their longrun position by looking for sustainable competitive advantages, including methods of engaging stakeholders on social issues.

MYTH 2: Reliable and consistent data are not available

  • there are tons of data points. While standardization is an ongoing process, investment managers have many data points and narrative information readily available to help them track portfolio company adherence to guidelines.

MYTH 3: Interpretation of social metrics is extremely subjective

  • again, most managers use many data points to determine impact. The data points are collected and scored, and compared with portfolio company peers.

  • There are many metrics and ranges that are set as quantifiable targets (e.g., the number of women employed and in senior management, etc.).

  • disciplined managers apply their criteria uniformly.

MYTH 4: Social investing underperforms the broad market

  • When SRI strategies underperform, usually they do so because of poor portfolio construction, not social screening.  but poor portfolio construction is no something that is a problem for social investing only.