Environmental, Social and Governance (ESG) Investing with Gabelli

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Published on Nov 11, 2016

Gabelli managing director of ESG, Christina Alfandary dicusses the importance and impact of ESG investing.

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Gabelli recently presented a session on Environmental, Social and Governance investing to RIAs at a major Conference . We wanted to highlight some key takeaways.

First, ESG, Impact and Sustainable investing is becoming increasingly recognized as a way for asset managers, and asset owners to use a broader set of information to evaluate companies’ risk exposure to natural resource constraints. It provides insight into overall quality of management. This is supported by several academic research studies. Integrated ESG investing is not about negative screening anymore but about identifying companies that have better ways of managing a business which is forward looking. Research has shown that top ESG scoring companies often outperform the market over the long run with lower volatility. For this reason, financial advisers should recognize that Sustainable Investing is becoming more important and mainstream to both institutional and individual investors.

The Second Takeaway is that With 30 trillion of wealth anticipated to transfer over the next decades from Baby Boomers to GenX and Millennials, it is notable that Millennials and women are particularly interested in ESG and responsible investing. Surveys show 73% of Millennials and 60% of women investors consider these issues. . Whereas Baby Boomers made their money and gave it away through philanthropy, Millennials are committed to doing something impactful with their investments immediately. AND ESG investing has evolved beyond just feeling good. By investing in companies which are managing resources better, It is about mobilizing capital to address large, global challenges like climate change, water scarcity, Product quality, employee safety and business ethics. The next generation is committed to using investments to positively change corporate responsibility and the world.

We would point out that while studies show many investors would base purchasing decisions on personal values, less than 15% say they understand how to invest their money in a way that supports their values. The majority of individual have not yet heard of sustainable or responsible investing.

So at Gabelli Funds, we see Advisers and asset managers playing a key role in educating investors about this important and growing area . 61% of investors indicate their Adviser has not mentioned sustainable investing to them. We suggest Advisers think about ways to engage their clients on ESG investing. This might be connecting it to personal interests or using it as a bridge from one generation into the next generation. We see Millennial investors become interested when they feel connected to what their investments might accomplish for more than just themselves. Advisers should see ESG and Impact Investing as the next step of GOALS based investing.

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