Emilie O'Neill - What is ESG?

ESG (Environmental, Social and Governance) is how socially conscious investors can screen potential investments by evaluating company behaviour and its influence on the environment and people.

Emilie O’Neill is the ESG and Equities analyst of the eInvest Future Impact Small Caps Fund (Managed fund) (Code: IMPQ), which is an Active ETF focusing on smaller companies that are making a positive contribution towards a sustainable future. Emilie takes us through the jargon around ethics, sustainability and ESG, and why smaller companies are best positioned to invest in this way. We discussed a day in the life of a professional investor in the small caps end of the equity market and are introduced to her fund, IMPQ.

In this episode, Emilie discussed the advantages of ETFS, and why Active ETFs make sense when investing in the small cap space. Without giving too much away, the small cap space provides lots of opportunities for interesting smaller companies that are focused on having positive outcomes for society and the environment and often with a global focus. Find out more at www.einvest.com.au/sharesforbeginners.

In the current environment, it makes sense to invest in Active ETFs. They don’t share the same discount to NTA that can be experienced by LIC structures and by actively choosing the stocks in the portfolio (and not following an index) Emilie and her team are able to pick standout companies that deliver in terms of financial performance, but also are sustainable.

A good example is Genetic Signatures (GSS), a significant holding in IMPQ. Emilie outlines why she likes GSS and how the IMPQ team invested early and enjoyed the positive returns since GSS announced their COVID-testing related breakthroughs.

We also delved into how she defines a company as sustainable, and what she looks out for to avoid “green-washing”. Her focus for IMPQ is to invest in companies that are actively contributing to a more sustainable future. It goes beyond the box ticking exercise.

This question came about from a post on LinkedIn from Michael Fraser, and ESG analyst embedded below.

He said that he has "noticed a concerning trend where large #ASX listed companies list all the reasons why they are ethical and should be considered an ESG stock.They join ethical organisations, donate to charity, do community work, promote gender equality and pledge to save the environment, plus more. Investors seem impressed and often suggest them as an ethical company, listing all of the above box ticking." 

One of my favourite topics is the risk of single stock shock. Emilie explained, that when investing in smaller companies, the risk of single stock shock is even greater, as these companies tend to be more volatile. Interestingly, her research suggests that during the COVID period of volatility, sustainability focused funds outperformed traditional funds, suggesting that investing in a diversified portfolio taking into consideration sustainability reduces the risk of single stock shock even further.

Lastly, Emilie shares how creating a babysitting matching service as a teenager still informs her investing today. A big thank you to Emilie for joining me on the podcast.

Emilie has included a summary of her thoughts and additional reading over at the eInvest website. Visit: www.einvest.com.au/sharesforbeginners

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Shares for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Shares for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation.

The company and/or guest has contributed to the costs associated with producing this episode of Shares for Beginners.