Will a Deeper ESG Focus Drive More Assets for Lazard?

Aside from COVID-19 and the painful recession, the one thematic draw keeping the attention of investors is the so-called ESG theme. This is the environment, social and governance theme, which is also deemed to be sustainable investing. Even as more firms focus on the theme, Lazard Ltd. (NYSE: LAZ) now is going after a larger piece of that pie. Its three cores are listed as human capital, natural capital and corporate governance.

Lazard has launched the Lazard U.S. Sustainable Equity Portfolio, which trades as SUSTX on the institutional side and SUSLX on the open-fund side. While its sustainable fund launch is specific, Lazard’s press release indicates that its U.S. Sustainable Equity portfolio management team managed more than $20 billion of client assets as of March 31, 2020. Lazard and its affiliated asset management companies also managed a total of about $211 billion in client assets as of May 31, 2020.

According to the release, the team managing its sustainable theme has an average of 23 years in the industry. The themes are shown to be aligned with an “equitable, inclusive and green future.” Also noted was that a business’s ability to generate sustainable financial returns is dependent on managing its people, operations and resources and on how it engages with society.

While many reasons have been given for ESG investing elsewhere and by other firms, Lazard’s view for this launch noted that sustainable investing is “synonymous with the principles of smart, long-term investing.” While it is a targeted fund, it comes with the goal of outperforming the S&P 500 Index.

There are several issues for selection within the fund. It is not solely an index-tracking fund, and that may differentiate it from other exchange-traded funds (ETFs) and other index-tracking funds that all seem to have so many exact overlaps within ESG investing.

The fund managers are targeting U.S.-listed companies with a market capitalization of more than $1 billion. Unlike the bulk of the index-tracking ETFs, this fund will have a higher concentration that normally will hold 40 to 50 positions.

Target investments in the fund are shown to be businesses that generate “high levels of financial productivity” and that consider the alignment of their “products, services, and operations with a more sustainable world.”

While the ESG theme may have massive overlaps, it is one theme that keeps drawing investor attention.