Insights


An Integrated Approach to ESG and Quality

  • ESG factors are key considerations in evaluating a company’s quality and sustainable growth prospects.
  • State Street’s Fundamental Growth and Core (FGC) Equity team has a long history of integrating ESG concepts into its fundamental analysis of companies.
  • We incorporate ESG considerations into the quality assessment of a company using a proprietary metric called the Confidence Quotient (CQ), based on our belief that companies that are strong in ESG are more likely to deliver the sustainable growth we seek.

In the past, environmental, social and governance (ESG) considerations were often used as overlays in existing portfolios, i.e., as screening tools rather than as an integrated component of the investment process. The last decade has seen a shift by asset managers toward incorporating ESG concepts into their investment philosophies, with the aim of enhancing alpha generation and risk mitigation.

While some investment managers are just waking up to the idea of incorporating ESG into their investment process to meet client needs, State Street’s Fundamental Growth and Core (FGC) Equity team has a long history of integrating ESG concepts into its fundamental analysis of companies.