ESG—THE GENERATION WAY
ESG vendors and ESG managers/ETFs have come under scrutiny for opaque processes, poor performance, and priorities that are not necessarily aligned with investor needs. Many have questioned whether an ESG strategy should even be considered.
We believe one should always contemplate environmental, social and governance issues when investing. We designed our own ESG process to address many of the major issues in today’s ESG offerings. Our approach integrates numerous ESG factors, as well as financial metrics, valuation, and active risk management. Furthermore, we provide clients with transparency on our ESG rankings and the ability to customize portfolios based on industry preferences.
LEARN HOW OUR ESG STRATEGY IS DIFFERENT ⤵
How Generation PMCA is tackling the biggest issues facing ESG strategies
Generation PMCA’s Approach
Our proprietary quantitative ESG system ranks companies on their commitment to environmental & social change, governance policies, culture, profitability, and shareholder alignment.
Common ESG Issue
Most ESG strategies emphasize the E of ESG, at the expense of social and governance issues. Social and governance issues are critical, governing human resources practices, culture, board composition, voting rights, and insider ownership.
Our proprietary Virtuous Cycle ScoreTM identifies companies with high profitability. These businesses have the resources and staying power to create lasting change.
Most ESG approaches do not embed any financial metrics into their ranking process. Portfolios can be comprised of unprofitable companies that are poor stewards of shareholder capital.
Ranking global stocks on their ESG factors is just the first step in our process. Top-ranked ESG companies are then sorted using our proprietary methodology that ranks companies on combined valuation, business quality, financial strength, and momentum metrics.
ESG portfolios are often heavily overweight technology companies. According to MSCI, at the end of 2020, the three largest ETF strategies had an average of 42% of their portfolios in the Information Technology and Communications Services sectors. Lofty valuations is a major reason why ESG strategies have underperformed broad indices in 2022.
Our ESG strategy utilizes a multi-pronged risk management approach. When we see the economy weakening or market momentum stalling, we may raise cash, alter portfolio holdings, and hedge our portfolios by short selling markets/sectors.
Whether an ETF or a fund, most ESG strategies do not utilize hedging to protect portfolios during market downturns.
Our ESG Solution
Global Value ESG Model
Utilizing our proprietary quantitative ESG methodology, companies are ranked on their commitment to environmental & social change, governance policies, culture, profitability, and shareholder alignment. Portfolios are comprised of securities selected based on our fundamental research and/or quantitative approach.
ESG—THE GENERATION WAY
ESG vendors and ESG managers/ETFs have come under scrutiny for opaque processes, poor performance, and priorities that are not necessarily aligned with investor needs. Many have questioned whether an ESG strategy should even be considered.
We believe one should always contemplate environmental, social and governance issues when investing. We designed our own ESG process to address many of the major issues in today’s ESG offerings. Our approach integrates numerous ESG factors, as well as financial metrics, valuation, and active risk management. Furthermore, we provide clients with transparency on our ESG rankings and the ability to customize portfolios based on industry preferences.
LEARN HOW OUR ESG STRATEGY IS DIFFERENT ⤵
How Generation PMCA is tackling the biggest issues facing ESG strategies
✗ COMMON ESG ISSUE: Focused on environmental only
Most ESG strategies emphasize the E of ESG, at the expense of social and governance issues. Social and governance issues are critical, governing human resources practices, culture, board composition, voting rights, and insider ownership.
✓ OUR APPROACH: Environmental, social, and governance issues represented with multi-factor ESG approach
Our proprietary quantitative ESG system ranks companies on their commitment to environmental & social change, governance policies, culture, profitability, and shareholder alignment.
✗ COMMON ESG ISSUE: No consideration given to financial metrics
Most ESG approaches do not embed any financial metrics into their ranking process. Portfolios can be comprised of unprofitable companies that are poor stewards of shareholder capital.
✓ OUR APPROACH: EMBEDDED FINANCIAL METRICS
Our proprietary Virtuous Cycle ScoreTM identifies companies with high profitability. These businesses have the resources and staying power to create lasting change.
✗ COMMON ESG ISSUE: Tech heavy and valuation all but ignored
ESG portfolios are often heavily overweight technology companies. According to MSCI, at the end of 2020, the three largest ETF strategies had an average of 42% of their portfolios in the Information Technology and Communications Services sectors. Lofty valuations is a major reason why ESG strategies have underperformed broad indices in 2022.
✓ OUR APPROACH: ESG CANDIDATES RANKED ON VALUATION
Ranking global stocks on their ESG factors is just the first step in our process. Top-ranked ESG companies are then sorted using our proprietary methodology that ranks companies on combined valuation, business quality, financial strength, and momentum metrics.
✗ COMMON ESG ISSUE: Absence of risk management
Whether an ETF or a fund, most ESG strategies do not utilize hedging to protect portfolios during market downturns.
✓ OUR APPROACH: ACTIVE RISK MANAGEMENT
Our ESG strategy utilizes a multi-pronged risk management approach. When we see the economy weakening or market momentum stalling, we may raise cash, alter portfolio holdings, and hedge our portfolios by short selling markets/sectors.
Our ESG Solution
Global Value ESG Model
Utilizing our proprietary quantitative ESG methodology, companies are ranked on their commitment to environmental & social change, governance policies, culture, profitability, and shareholder alignment. Portfolios are comprised of securities selected based on our fundamental research and/or quantitative approach.