Why ESG investors should look beyond the obvious choices – AllianceBernstein

Companies that are on course to overcome ESG controversies deserve closer attention from investors.

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Sustainable equity funds tend to shy away from sectors and companies that are deemed to be controversial. Yet by targeting challenged sectors with room for improvement and overlooked companies that enable positive change, AllianceBernstein think investors can access more diverse sources of return potential in portfolios focused on environmental, social and governance (ESG) issues.

For many ESG-focused investors, buying shares of companies that are good actors seems a natural choice. After all, shouldn’t we reward companies with low CO₂ emissions, positive social policies and good governance? By doing so, bad actors will be incentivised to behave better. When executed properly and backed by a coherent engagement agenda, this strategy is an effective way to support ESG goals and source equity returns. But there’s another road to ESG investing that is much less travelled—and offers access to an entirely different set of companies.

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