Investment Strategies

Navigating ESG: What to Demand and What to Avoid

During a panel discussion at the 2019 Milken Global Conference, Scott Mather, CIO U.S. Core Strategies, takes a look at current themes in how ESG is integrated into traditional asset management. To learn more, download our ESG investing report at

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Scott Mather: From the fixed income perspective, several years we sort of realized that fixed income was getting left behind, for the most part. People were doing things, deepening their research on the equity side of the business. So we saw it as great opportunity.

And certainly understood that there's growing risks if we didn't up our game in our research. So we really wanted to address two things. And we took the integration pretty seriously, in saying, "The analysis has to be done by the experts. So every group, develop a methodology for your particular corner of the bond market."

They develop the framework themselves. And being experts in that particular area of the markets, I think means that they're doing a better job than imposing something by somebody who's just an ESG expert.

And, of course, to maintain some consistency, we do have ESG analysts that basically going around different groups, just trying to make sure that we don't have a hundred different versions of what people are thinking is the right way to approach ESG in their sector.

But we wanted to have a platform, too, so that we could deliver a solution for any client that comes.

Clients will have different concerns, different levels of ESG-ness, if you will, different things they want to achieve. And we want to have a flexible platform, where we can just dial in exactly. Give them advice on how they should think about structuring their particular mandate.

So we have that. It's a platform. But all the integration that we built out is really to the benefit, we think, of all of our investors. Because we think it's

I think people for a long time just assumed the only way to have an impact or change corporate behavior or issuers' behavior is through a proxy vote. But they didn't really think through that in fixed income, what's unique is this maturity.

If somebody's issuing, they constantly have to care about their ratings. Yes, they constantly have to care about their bond investors. So big, large bond investors can have an impact. They can engage with the issuers.

Increasingly, the issuers understand that traditional credit ratings, from the traditional agencies, are going to incorporate more and more ESG-type analysis. And so it'll have very much an impact on the cost of servicing their debt going forward.


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