Environment, Social, and Governance (ESG) objectives are not incompatible with commodity investing says an OFI portfolio manager.

Certainly, ESG in commodities is possible through proactive asset management, according to Benjamin Louvet, commodities portfolio manager at OFI AM.

How the twain shall meet

One very simple method is to drop an offending sector or industry from the investing universe of the fund.

For example, “it is what OFI AM decided to do by excluding coal developers since they don’t try to improve their impact on the climate,” explains Louvet.

Another example, presently under consideration of OFI, is dropping gas-flaring shale oil producers with questionable impact on biodiversity.

ESG in commodities: the social angle

OFI AM has long considered data on mine fatalities in its investing procedures. The fund, therefore, seeks to limit work and safety-related accidents at mines by excluding companies with a poor safety record.

ESG in commodities via proprietary analysis methodology

OFI’s proprietary analysis methodology throws up information on:

• ESG issues by sector
• Issuer rankings on ESG
• Issuer controversies

Portfolio managers can, therefore, have a bird’s eye view of the ESG-commodities selections.

Other methods

OFI has drawn up a commitment policy for systematic consideration of ESG factors. This policy aims to exert a positive influence on companies’ ESG practices in the long term.

Additionally, OFI participates in dialogues with mainly European companies and shareholder general meetings.