Identifying a company's ESG characteristics requires fundamental, bottom-up, forward-looking analysis where views are unavoidably going to differ, depending on whether the analyst adopts an active or passive approach to ESG issues. Active managers will have a vested interest in the companies in which they invest. Their extensive insight and knowledge into companies and industries are critical to meaningful and thoughtful discussions to help drive change, tackle challenges, and ensure company management teams are held to account to make the transition.

There is no simple, single answer to achieving a sustainable future. It will require significant time, direct engagement, and investment in helping local and global corporates make the change. But engagement by itself is not enough. Measurement is critical to success. Any decision that is made without first assessing the costs or benefits each company has for the environment and society is, to put it bluntly, flying blind.

An initial assessment must determine how different company behaviours on issues such as taxation, healthcare, and innovation can deliver social costs or benefits. That assessment must take a granular view of carbon emissions on a company-by-company basis, and not just focus on the emissions accrued directly or through the firm’s value chain, but also consider the knock-on emissions created and rarely accounted for. There are other factors and nuances to consider in this debate.

Clients will make their own assessments. Previously, the challenge for clients was whether to stay with an ESG investment and wait for ESG benefits to accrue, or to sell out of that investment and shift assets into a more clear-cut ESG opportunity. Brunswick Funds gives investors a third path, where ESG-themed equities can be used as loan collateral that delivers liquid capital for investment into new and better-performing ESG companies.