William Lock, Head of Morgan Stanley's flagship International Equity, Global Franchise/Brands and Global Quality Strategies, discusses sustainability and his investment team's approach to, and integration of, ESG considerations.
What is your team's approach to ESG?
WILLIAM LOCK (WL): We're all about finding and investing in companies with good prospects for sustainable or improving returns on their capital over the long term. ESG considerations form an important part of this because any material weakness in the Environmental, Social or Governance areas potentially threatens this sustainability.
How do ESG factors influence security analysis and portfolio decision-making?
WL: For us, understanding how ESG factors may impact long-term sustainable returns has to be rooted in company-specific analysis. This is integrated into our fundamental, bottom-up investment process, company by company. We're conscious that companies within industries may have different "starting points" in terms of addressing their specific material ESG challenges and opportunities, but where we have identified ESG factors as material we look for evidence of incremental improvement.
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