How Are ESG Funds Managed?
There are a variety of styles in which environmental, social and governance (ESG) funds are managed. As with classic fund investing, the typical ESG fund manager will consider traditional investment metrics incorporating factors such as valuation, growth, earnings and balance sheet health. In addition to these financial metrics, the manager will incorporate an array of ESG metrics into the investment process, analyzing factors that include:
Environmental: pollution, consumption and disclosure
Social: tobacco, labor practices, gambling, pornography, weapons
Governance: board independence, CEO compensation, auditing processes
Faith-based: abortion, contraception, alcohol
At Dana, we manage our ESG portfolios with the comprehensive, balanced and thoughtful investment approach in which we manage our strategies, incorporating ESG factor analysis into our uniform process that attempts to minimize volatility and improve return consistency.
Comprehensive: our proprietary quantitative ESG model utilizes thousands of underlying data points from multiple research vendors to rank approximately 3,000 U.S. stocks
Balanced: an ESG rank is calculated for each stock by weighting the factors using a geometric mean that identifies companies with favorable attributes
Thoughtful: ESG criteria are integrated into Dana’s traditional fundamental stock selection representation, resulting in positive, best-in-class representation
Advocacy is an important part of Dana’s ESG portfolio management process. At Dana, we stay active after the stock selection process, communicating with companies regarding best practices in corporate responsibility and accountability. We also adhere to prescribed ESG proxy voting guidelines.