ESG/SRI – BOX TICKING OR REALITY?
THE ADVANTAGES OF ACTIVE SUSTAINABLE INVESTING OVER PASSIVE Andrew Parry, Head of Sustainable Investment at Newton Investment Management explains why he believes in the virtues of active management.
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n times of crisis, you will see a slew of articles highlighting the virtues of active management in providing some protection from plummeting market indices. We believe there is good reason for this; the ability to avoid those industries at the centre of the storm and to have the flexibility to hold cash to provide ‘dry powder’ for reinvestment in unfairly sold-off (but attractively-priced) companies when conditions ease, are both legitimate tools in the active manager’s armoury which are unavailable to their passive counterparts. In our view, it is the duty of active managers to respond dynamically to the current market threats by taking bold and well-researched positions away from the index if necessary; by its very nature, an index can only reflect yesterday’s successes and not tomorrow’s winners. This is especially important in the world of environmental, social and governance (ESG) investing, because the way active
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managers build portfolios can have a material influence on differing relative performance outcomes – even when their defensive characteristics as a whole come to the fore, as we’ve already seen in the current Covid-19
The ability to avoid industries at the centre of the storm and to have the flexibility to hold cash to provide ‘dry powder’ for reinvestment are legitimate tools in the active manager’s armoury
