Benzinga recently had the chance to speak with Gregg Sgambati, Managing Director of S-Network Global Indexes, about the rise of environmental, social and governance (ESG) investing and the impact that it is having on the corporate world.
Sgambati discussed the pressures fossil fuel stocks face from ESG-related fund divestitures, the ESG metrics investors should monitor for signs of possible corporate malfeasance and the latest trends in ESG investing.
Sgambati said this year is a particularly important year for ESG causes.
“During this election year, fossil fuel companies will find themselves in the crosshairs of activist investors representing pension funds and retirement funds,” he explained.
A Few Specifics
Many coal stocks have been hit hard by fund divestitures in recent years, and that trend could spread to other fossil fuel stocks in years to come.
While corporate malfeasance is impossible to predict, Sgambati said investors should monitor certain ESG metrics as possible warning signs. He saw several red flags for Volkswagen AG (ADR) VLKAY 0.73% VLKAF 0.54% prior to its devastating emissions scandal.
“In ESG terms, Governance provides the best insight into corporate management,” Sgambati told Benzinga. “While Governance ratings cannot predict that a company’s executive will perpetrate a crime, in Volkswagen’s case, they did indicate years of shallow transparency coupled with low-percentage of free-float shares.”
Looking Ahead
When Benzinga asked about the future, Sgambati said…
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