For those wanting to find out what fund management is all about, don’t watch “Billions”. However, ever of the moment, Season 3 Episode 9 sees Taylor Mason pitch to a Russian oligarch, Axe Capital’s first foray into an ESG strategy. 29 years behind Kames, Taylor…
The screen plot, nonetheless, aims to emphasise tension between Taylor and Bobby Axelrod; Taylor does have a point when saying “I think international criminals are unstable bedrock for a cap raise”….
But it does raise the question who should want an ESG approach to funds and indeed what that ESG approach should be. There are added complications for fixed income investors too; no voting rights and benchmark parameters for starters. So to make Showtime’s scriptwriter’s life easier I have written Taylor’s script for how she should pitch ESG next time to John Malkovich, the Russian oligarch or one of his henchman.
“First, break a habit of a lifetime and obey some international government rules and don’t buy companies that make cluster munitions. In the words of our President, Bad! Anyways we can do better than that.”
“Second, you value your health, right? So don’t finance the black stuff. No oil: we don’t want you breathing too much Co2. Oil companies are out.” Oligarch squirms to consider the source of his ill-founded fortune.
“Third”, Taylor adds, “We can use algos to screen for bad companies. I’ve selected the best team to analyse ESG factors. These guys are winners.” [In this episode Taylor selects crack computer geeks to do “bad” things in equity market quant strategies. Let’s use our imagination and think they might be able to effectively screen ESG factors – something we have struggled with given the data quality]
“Fourth, and if you really care about ESG,” Taylor looks emphatically into the eyes of the now seething oligarch, “we incorporate it into what we do. No analysis without thinking how these companies are managed. We’ll figure out how they impact their workers, their customers. Are they damaging the world? If you want to do good you need to think about this. Are you with me?”
Taylor finishes “We want you to invest and deliver sustainable development goals….” at which point the Russian oligarch blows: John Malkovich at his malign, evil, sphinx-like best smashes his fist on the table and screams “What do yooooou take me for…?”
Of course this is all a bit surreal but it does display the various ESG approaches potentially available. We are firmly in the camp of bottom up research for the ESG investment process – and not being John Malkovich.