ESG’s Impact On Investing

Natasha Lamb is managing partner and director of Equity Research and Shareholder Engagement at Arjuna Capital, an investment firm focusing on sustainability and impact. Arjuna allows clients to align investments with their values. Global Finance asked Lamb to explain strategy and results.

Global Finance: What is your experience of how companies approach sustainability via environmental, social and governance (ESG) investing?

Natasha Lamb: We’ve engaged on issues of climate change, gender and racial pay equity, and diversity. We’ve engaged with social media companies on fake news, and election interference, and content governance and a variety of other things. What’s happened over time is that companies became more receptive to issues of sustainability, because it is in their enlightened self-interest to be proactive. I think investors have a lot to add, bringing a diversity of perspectives. And companies have become more and more receptive to those ideas and are starting to incorporate environmental, social and governance (ESG) issues more fully into their management. We see companies that manage those issues well as being of higher quality and better managed in general.

GF: Is there a trade-off for a company between doing what is right for society in the long term and what boosts profits in the short run?

Lamb: We don’t think there’s a trade-off at all. In fact, we believe companies that manage their ESG risks well are more apt to outperform. These issues are mutually reinforcing rather than mutually exclusive—you can only do good, or you can make a lot of money. We think you can make a lot of money while being a good corporate citizen and taking care of the environment, taking care of your people, governing well—that those things are mutually reinforcing. Our strategies have outperformed since inception in total and on an annualized basis.

I think the world is changing. I think it is clear that climate change is a challenge, and that natural resource constraints will become more and more of a challenge over time, and that inequality is leading to instability. And those companies that are forward thinking and proactive will be more resilient and can take advantage of the opportunities these challenges present over time. I think something like $70 trillion in assets are signed onto the [UN-supported] Principles for Responsible Investment, or PRI.

GF: Do you think Europe is more ad-vanced in sustainability investment?

Lamb: I do. We have a global strategy, Arjuna Global Impact. It’s more of a thematic strategy, where the companies we’re invested in—their products and services—are contributing to a more sustainable economy. It is a global strategy because there are really interesting companies across the world that are innovating in ways that we aren’t in the United States.

Whether it is bio enzymes, or sustainable forestry and ag, or sustainable mobility, there is so much that is happening in other places. Here in the United States, we tout ourselves as sort of the innovator of the world; but I think older countries, with longer-established governments and processes, tend to take a more systemic approach. I think we have something to learn outside of our own realm of thinking.

GF: Can you give some examples of corporate sustainability champions?

Lamb: I think Novozymes is really interesting. It does bio enzymes. Another one is Tomra, which basically recycles machines for single-stream recycling. We even look across to Japan—and there’s Tokyo Electron, which makes these very water- and-energy-efficient semiconductors. There’s a lot happening outside of the US that I think is really interesting—even the insurance companies. Some of the Swiss and European insurance companies are really taking things like climate risk into account in very smart ways. Another good example is Svenska, which is a Swedish company. They work with feminine hygiene products and go into emerging markets and do education around that. That’s this really interesting kind of women’s health company. So that’s another good example.