[ ESG ]
“ It ’ s not about finding the best companies , it ’ s about avoiding the worst companies ”
The Merchants Trust is unlikely to be many people ’ s idea of an “ ethical ” fund , holding defence firm BAE Systems and oil majors BP and Shell in its top-10 . However , it has a team that weighs up the ESG score on every potential holding , taking external measures as a starting point before verifying these internally . “ ESG factors are important along with a lot of other factors such as competitive position and structural growth within the industry ,” says manager Simon Gergel . “ Why ? Because they are risk factors that can affect businesses both in a positive and a negative way .” But how exactly does a focus on ESG factors make you money ? For Geir Lode and Louise Dudley , managers of Hermes Global Equity , a company ’ s ESG scores are among the first metrics they look at when searching for potential investments . “ It ’ s not about finding the best companies , it ’ s about avoiding the worst companies ,” says Lode . That ’ s really important to us .” “ If you divide governance scores into deciles , the companies in the lowest
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