Challenging perceptions on responsibility and returns

Jonathan Boyd

Hermes Investment Management has published ESG in emerging markets: Challenging the dominant investment paradigm, a white paper that challenges perceptions about rates of return gained through responsible investing.

Gary Greenberg, head of Hermes Emerging Markets, looks at returns data over both short (three month) and longer (three year) terms, and discusses the incentives driving investment choices made by fund managers.

Greenberg said: “We consider ourselves to be long-term owners of shares on behalf of the underlying beneficiaries. We are ultimately responsible for the selection of a company’s board, and therefore its oversight of management and the actions of the company in its societal context. If we are to profit from gains the company makes, we are also responsible for the problems it may cause. We are responsible for ensuring, and must ensure, that both its gains and ours are not ill-gotten.”

“That means extra work in analysing companies: understanding externalities, governance practices, environmental impacts, treatment of workers and influence on local communities.”