Sam Vereecke, CIO fixed income, takes a look at the latest Fed cut and its wider implications.

ESG controversies can have a substantial negative impact on financial performance, particularly when these controversies involve issues material to the sector in question or create sector-wide spillover effects. This article delves into specific case studies — ranging from a building material company's role in the Grenfell Tower fire to the opioid crisis in the USA — to illustrate how investors navigate these challenges. In addition to its monthly sector controversy reviews, DPAM has implemented a process for addressing ad-hoc controversies. These controversies are normally flagged by media reports, broker research or downgrade by data providers.

As the landscape of investing evolves, assessing a company’s ESG performance, before investing, has become crucial. One key aspect of ESG investing is understanding and mitigating the risks associated with ESG controversies. Here, we consider the financial implications of the materiality and severity of the controversy as well as possible spillover effects.