ESG regulation could benefit the financial sector

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One of the foremost environmental, social and governance (ESG) advocates eagerly anticipates ESG sector regulations that would eliminate the false narratives that some fund managers create in the $ 35 trillion sector, reports Bloomberg.

Trillium Asset Management CEO Matt Patsky got his start in ESG-style investing in the ’90s even before anyone really invested in the industry, and believes that today very few funds actually reflect sustainable investment. In 1994, Patsky was the first to introduce a “green-chip” index containing socially responsible companies.

Patsky applauds the attention paid by regulators in the industry, saying: “This brings scrutiny in a region that has become the Wild West, where fund managers have the discretion to apply ESG labels on anything. ” Patsky firmly believes that unless a company interacts with the companies in which it invests and pushes them to increase their ESG practices, the fund in question is not a true sustainability fund.

Regulation is starting to spread throughout the industry globally; Europe promulgated its Sustainable Finance Disclosure Regulation in March, which cuts down on greenwashing and requires real data to back up claims. In the United States, the SEC reviews ESG data reported by companies and considers the requirements and consequences of inaccurate claims.

Patsky considers a fund to be genuinely ESG if there is pressure on business leaders to change behavior and extend sustainability practices, shareholder resolutions filed at the end of investors, and also the vote on these resolutions tabled by others.

“Unless that happens, most ESG factors will be largely ineffective in solving systemic problems quickly,” Patsky said.

Putnam engages with businesses, taps into data

Putnam believes in sustainability and considers ESG practices to be an essential aspect of its approach to investing. Its active ESG-focused sustainability managers are a fundamental part of its work to align shareholders’ ESG values ​​with investment practices by engaging directly with the companies they invest in about their principles and practices. ESG.

The Putnam ETF on Sustainable Leaders (PLDR) invests in companies whose attention to ESG issues goes far beyond basic compliance and for which ESG is integral to their long-term success. These companies have transparent goals and provide consistent and measurable progress updates.

As a semi-transparent fund using the Fidelity model, PLDR does not disclose its current holdings on a daily basis. Instead, it publishes a tracking basket of previously disclosed holdings, liquid ETFs that reflect the portfolio’s investment strategy, and cash and cash equivalents. The monitoring portfolio is designed to closely monitor the overall performance of the actual fund portfolio, and reports on the actual portfolio are published monthly.

Holdings at the end of August included Microsoft Corp. at 8.28%, Apple at 7.38% and Amazon.com at 5.01%. The fund was heavily allocated to information technology stocks (32.41%), followed by healthcare at 15.91% and consumer discretionary at 14.61%.

PLDR has an expense ratio of 0.59% and has 60 stakes at the end of August.

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