The Rising Popularity of ESG Investing: Part Two
In December 2019, Wendy Pan, a Director from Segal Marco Advisors’ private markets team, participated in AssetTV’s ESG Masterclass as a panelist. You can read Part 1 here.
Here is Part 2 of Wendy’s ESG discussion, including her comments on ESG growth and how to educate the next generation of ESG leaders.
Interviewer: “What are some myths or misconceptions about ESG?”
One of the biggest misconceptions is that because the ESG framework asks companies to serve stakeholders, it does not ask companies to serve shareholders anymore. ESG skeptics are often saying because you're looking at the environment, you're looking at the society, you're looking at employees, are you ultimately serving the shareholders? And the truth is yes. The long-term success of our industry, financial services, is based on trust. Society has to trust private and public companies with its wealth. Finance has to have a positive function for society for the whole industry to exist. During the 2008-2009 global financial crisis, if we asked an average person in America if he/she trusted finance? If that person trusts finance as an industry, it is a positive thing for society. However, not all of them will say yes. ESG is really a way to bridge that gap in trust. It is a framework for how companies can service stakeholders and ultimately generate returns for shareholders.
Interviewer: “As we head into the new decade, we're expected to see growth in terms of ESG investing, but what do you expect?”
I definitely see continuous growth in the sector. One very important indicator of growth is where the smartest people choose to go work. If you go to university campuses, especially MBA programs today, there are more students demanding impact investing or sustainable investing classes than even some traditional corporate finance classes. Not to say that traditional corporate finance education is not important. It is. However, trends show that an increasing number of students want to go into sustainable investing. This will be a very important tool for asset management industry as a whole to recruit future talent.
Interviewer: “On that note, what do you think the industry could do to educate the next generation of ESG leaders?”
For higher education institutions, it is not easy to find individuals who want to combine finance and working in professional services with wanting to work for a government or a nonprofit and serving society. In the future, we would have to combine these fields and provide a more holistic education for individuals. That's a tough one. And when it comes to our industry, broader education on ESG analysis has to come full circle. As companies, we need to educate our industry peers as well as clients who work at government and nonprofits. To our broader society, we can educate people on the topics of ESG. These are the people who elect these governments, people who work in the companies. To achieve all of this, we need more than one day’s work.
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