Why it’s time to embrace ESG strategies

Wayne Wachell from Genus Capital tells WP how advisors can take advantage of the burgeoning space

Why it’s time to embrace ESG strategies

With the oil market growing increasingly turbulent and concerns around climate change growing, more investors are showing interest in adding green investments to their portfolios. The divestment movement is gathering pace and it’s not just ethical investors who are turning away from the oil industry, huge institutional investors are also joining the party.

“In the longer term, investors are going to want to have their portfolios aligned with their values,” says Wayne Wachell, CEO of Genus Capital. “Right now, our focus is on investors who have concerns about climate change and want to have their portfolios aligned with that concern.”

As well as companies working in the renewable energy space, Wachell identifies organizations that help corporate companies become more energy efficient as being potentially attractive investments. Although he sees a lot of “low hanging fruit” in that space, Wachell does urge investors to be cautious.

“Make sure the company has the financials and a business model that works, don’t just blindly pile into this space,” he says. “People are throwing money at it, but finding a successful business model that is scalable is the way to make returns. When you get a combination of those things, you can find something that is disruptive and will be successful. A lot of winners will emerge from this space once these models are fine-tuned.”

Wachell sees plenty of opportunity for advisors who are prepared to focus on and specialize in certain environmental, social and corporate governance areas. He has witnessed the institutional market embrace ESG integration, and it's becoming a common move for a lot of big institutional investors. It’s not uncommon for value stock managers to now have an ESG analyst on their team, Wachell says.

“These issues are working their way into the main stream and advisors should be aware of that,” says Wachell. “You can’t ignore these things because big institutional managers are focusing on them and they are impacting corporate behaviour. Why do you think all the big energy companies have divested from the oil sands? It’s because they are concerned about their brands.”

“This can’t be ignored. It’s a great opportunity for people who want to specialize in this area; it gives you a way to differentiate yourself from the rest of the herd.”

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