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Kathryn McDonald on long-term value and ESG

Prior to co-founding ESG-focussed investment firm Radiant ESG earlier this year, Kathryn McDonald was head of sustainable investing at Rosenberg Equities — the famed quant arm of AXA Investment Managers. There, she was responsible for overseeing the integration of ESG information into the firm’s strategy.

McDonald has been engaged in all matters of ESG for more than three decades, and as such is well placed to comment on the rise of ESG — for example, global inflows into sustainable funds rose 72% in the second quarter of 2020.

“I think this idea of long-term investment value to a great extent hinges on companies being on the right side of what we see as these big supply and demand pressures — big forces that will move us as companies as individuals as society,” McDonald told Opto Sessions.

“I think this idea of long-term investment value to a great extent hinges on companies being on the right side of what we see as these big supply and demand pressures — big forces that will move us as companies as individuals as society”

 

She suggested that how companies come to look at matters such as resource scarcity, regulations and what she called the “social licence to operate” will all factor into company’s future earnings, the cost of its capital and ultimately its valuation.

“These are the drivers of risk and return,” McDonald noted. “What we refer to as ESG and even impact [investing] will really figure prominently into our assessment of a company and that company's competitiveness.”

McDonald considers that all these themes are intrinsically linked. “All else equal, we believe that companies that navigate these themes better than their peers will have an advantage over time,” she said.

 

For more on McDonald’s view of the link between ESG and long-term value, listen to the full episode, here:

 

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Listen to the full interview and explore our past episodes on Opto Sessions.

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