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Underinvestment in miners and oil companies could disproportionately hurt British investors who have put their money into the commodity-heavy FTSE 100. Several miners are among the blue-chip index’s top dividend payers, including Rio Tinto, Anglo-American, BHP Group and Glencore.
Mining stocks have jumped this year amid a commodities “supercycle” that has lifted prices for key materials such as iron and copper, with the FTSE 100 industrial metals subsegment outperforming the index by about 10pc.
“It’s a tricky one, because obviously, the goals of the ESG push are paramount,” said Tyler Broda, an analyst at Royal Bank of Canada. “But the application of those are creating some disconnects that are not necessarily beneficial.”
Mr Iggo said simply blacklisting such companies also takes away an opportunity for shareholders to positively pressure managers.
“Rather than just turn a blind eye to it, I think investors have to continue to exert pressure on those companies to do the right thing,” he said.
ESG investment supporters claim the approach produces above-market returns, particularly during the market tumult early last spring,
However, research by index provider Smart Beta found this phenomenon was more down to the typically superior profitability and investments of companies that also score well for ESG factors.
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