ESGF, on the other hand, takes a global approach. The ETF tries to outperform the MSCI All Country World Index with strong ESG practices and re-weights companies based on revenue earned. MSCI ESG Research utilizes a proprietary ESG scoring system and screens companies based on Sharpe Ratio, a measure of risk-adjusted performance.
ESG investments try to deliver returns while monitoring the long-term impact of a company’s business practices on society, the environment and performance of the business.
Incorporation of non-financial data over ESG practices can provide deeper insight into company performance, compared to traditional fundamental analysis. A number of third-party firms are now providing ESG metrics from companies and comprehensive ESG scoring on a number of firms.
“In the past, there’s been sort of negative screening, which people felt like and then some of the data supported. It took you out of main parts of the market that would potentially drive return. So it’s evolved,” French said.
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