Motivated by Returns

The product director of Bloomberg’s operational risk division, Greg Larkin, shared the inside story on how and why Bloomberg added sustainability data to its terminals in this 2011 FOX Fall Forum session. Martin Whittaker discussed his work in bringing together family offices and some private investors who are interested in sustainable investing but do not want to sacrifice returns.

• There is growing interest in sustainable investing, but it can be difficult for investors to determine the right metrics for evaluating a company’s sustainability record. 
• Bloomberg is forcing some clarity in areas of sustainable investing that have been very difficult to measure by changing their computer terminals to include environmental, social and governance data as part of their basic profile for every publicly traded company. In Bloomberg’s view, ESG information is not “extra” financial data but rather a true indicator of the quality of a company’s management, which has a direct impact on earnings.
• Environmental, social and governance factors are more than worthy causes; they are real drivers of value over time. These drivers overlap with earnings and risk, and when it is possible to see how these factors correspond with one another, investors are able to identify major turns in a company’s fortunes before they arrive. 
• With Bloomberg requiring environmental, social and governance data, more companies are becoming more transparent on aspects of their operations that they traditionally have not reported, such as carbon emissions, safety standards, HR policies and employment practices – all of which are areas that can be problematic if mismanaged.
• More families are actively seeking investments that provide environmental and social returns in addition to strong financial returns, and a number of these families are investing together in small groups to share costs and risk. 
• Investors should approach sustainable investing just as they would any other investment theme: consider its role as part of an overall investment strategy, conduct the proper due diligence and implement a standard of measurement for results over time.