Live at MICUS: Active Management Offers Additional Layer of ESG Screening

The onset of the Russia-Ukraine war served as a wake-up call for many investors that looked at ESG as a solution that would work in all markets.

“I think Russia serves a good purpose to remind everybody that this is still a market where I think it’s critical to utilize active management,” Steve Liberatore, lead portfolio manager at Nuveen, a TIAA Company, said May 17 at the Morningstar Investment Conference. 

Liberatore said, speaking from the perspective of a fixed income manager, Russia was actually in his eligible investing universe up until February.

“We go through a pretty rigorous process of creating an eligible universe that is basically our starting point, and it’s a good reminder that…a rating on an issuer from an ESG perspective is someone’s opinion – and that’s all it is,” Liberatore said. 

“I have never owned any Russian debt, and I don’t know how anyone could. When you simply look back from a [ESG] perspective, I’m not sure how an authoritarian regime entirely tied to the fossil fuel extraction industry, with no concept of transition, would ever be considered an ESG leader,” Liberatore added.

As an active manager, Liberatore said he’s been able to work with firms that are showing that they are trying to transition away from the fossil fuel industry.

“A rating agency view is just someone’s opinion. You can utilize that, and there’s valuable information in there…because those analysts spend a lot more time with the issuers than we’re going to be able to – even though we try to engage with all of our issuers – so it’s important to factor that into your analysis,” Liberatore said. “But you still have to bring to bear your expertise and know that when you’re selecting securities or constructing a portfolio, you’re delivering what your investor is looking for, and not just blindly looking at a rating that someone else is providing.”

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