My chat with Mike Cantara, Senior Managing Director, Global Client Group, MFS Investment Management about Environmental, Social and Corporate Governance (ESG) issues.
This is not your ordinary conversation on ESG. I ask Mike a few devil’s advocate questions on the topic to really explore the pros and cons in more depth. Mike was a good sport and I think the conversation was better for it.
Mike emphasises the importance of striking the right balance: “Companies that pay attention to material issues add value over time, but companies that pay attention to immaterial issues detract.”
Mike Cantara podcast overview:
2:25 30 years ago non-US investing was quite novel in America.
3:30 I thought about becoming a priest first
7:30 When did sustainability become more explicit in your investment process?
10:00 Observations on clients’ journey in ESG
12:00 There are too many powerful trends to deny benefits of ESG
13:30 What changes have you seen in companies in sustainability? Lots of glossy brochures.
15:00 There is a lot of great data, but we need a framework to compare apple to apple.
17:30 Companies that pay attention to material issues add value over time, but companies that pay attention to immaterial issues detract. Companies should not be all things to all people.
18:30 Millenials and women will be driving force behind ESG investing.
20:30 Can technology play a role in people opting in or out of sustainable strategies?
22:00 ESG integration allows us to start off with an unrestricted universe.
24:00 The trend towards intangible assets is consistent with focus on ESG; they are long term, they are meaningful, but you can’t necessarily point to it on an income statement.
27:40 How does ESG translate into a stock call?
29:00 Negative ESG assessment can lead to higher discount rate and hence a lower valuation.
32:30 You can call it ESG, or you can call it something else; just don’t ignore it.
33:45 Playing devil’s advocate: asking the sceptics questions
36:30 ESG is not just about screening; there are opportunities here as well
40:00 What about sin stocks? They perform well.
47:00 Where do you draw the line?
48:00 The case of Boeing
51:30 The ESG of Tesla: E? Tick, S? Not so much.
54:00 Can you put a number on the impact of ESG on portfolios?
56:45 What were some of the harder lessons you learned as an investor?
58:55 Tip for good investing: write down why you own a stock and revisit this from time to time