Our ESG Investing Approach
A company’s environmental, social, and governance (ESG) issues can be a material driver of performance. In some cases, ESG factors have the potential to drive unacceptably wide or asymmetric ranges of long-term outcomes; while other issues, though not material today, could pose future risks if not adequately managed. Assessing the potential impact of ESG issues on a company is therefore critical to our investment process.
Value Investing and ESG
ESG Integration means fully understanding the value opportunity at stake for a given company.
Learn More About Our Philosophical AlignmentValue Investing | ESG Integration |
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Temporary Difficulty | |
Investments are experiencing temporary difficulty | ESG controversies can be a material driver of temporary difficulty |
Opportunity | |
An opportunity to buy a good business "on sale" | ESG laggards may have an embedded opportunity to improve |
Long-Term Perspective | |
Requires patience/long investment horizon | Many ESG issues require a long-term perspective |
Alpha Potential | |
Earnings recovery = source of alpha potential | ESG improvement = source of alpha potentia |
ESG Integration
ESG integration is an inherent part of our dedication to finding value. As long-term investors, we use our influence to improve company ESG performance when the issues are material to investment outcomes.
1. Judgement Over Scoring | ESG integration is stronger with fundamental research insights that reflect material ESG-related risk and opportunities, rather than a mechanistic approach based on third party ESG scores |
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2. Transition Over Stasis | Companies and industries are constantly evolving; what matters most is the future, not the rear-view mirror. We do not believe that there is such a thing as an "ESG stock" |
3. Focus Over Generalization | Industry analysts lead our company-specific ESG research, supported by dedicated ESG analysts on the investment team |
4.Engagement Over Exclusion | ESG improvement comes from active ownership not divestment |
Our Research Process
Our commitment to incorporating ESG into our investment process drives us to continually enhance the way we look at ESG issues. For a detailed explanation, review our comprehensive ESG Investing Approach.
Read Full ESG Investing Approach1. Engage | with Management |
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2. Identify | stock-specific ESG issues |
3. Analyze | financial materiality of ESG issues |
4. Evaluate | ESG impact on future normal earnings |
5. Monitor | changes that may influence conclusion |
Opportunity List
Our Opportunity List provides us with a structure to utilize fundamental research for assessing the likelihood of issue improvements.
Learn More About Opportunity ListBetween Initial and Final Review | |
1. Identify | Naive screening criteria help us identify areas where material ESG issues may exist. Fundamental research conducted by the analyst may uncover additional ESG concerns. |
2. Assess | The analyst conducts a thorough assessment on the materiality of the ESG issue(s), with support from the ESG team. |
Final Review | |
3. Deliberate | Portfolio managers, analysts, and the ESG team meet to arrive at a consensus on whether a name should be added to the Opportunity List |
Post-Buy Decision | |
4. Monitor and Engage | For names that are added to the list, a plan is formulated with objectives and milestones. The analyst is responsible for tracking and engaging with the company. There is no finite timeline for engagement or a decision on removal from the list |
Thought Leadership
True Costs of ESG: Cobalt/EV Supply Chain Case Study
This case study explores the hidden social (and ultimately financial) costs related to the mining of cobalt, a critical component of EV batteries.
Learn More →Energy Transition
In discussing how we are positioning our portfolios to capitalize on energy’s future, we highlight GE, ArcelorMittal, Dow, NOV, Shell, Edison International, Lear, and Michelin.
Learn More →Analyzing Biodiversity
This primer explains why biodiversity matters, evaluates considerations for different sectors, and provides an engagement framework with regards to this increasing area of focus for investors.
Learn More →Philosophical Alignment ESG/Value
The value investing philosophy is inherently compatible with ESG integration.
Learn More →Assessing Corporate Governance
Assessing the impact of ‘good’ governance can be foundational to investment analysis, within the context of fundamental company research and commitment to active ownership.
Learn More →Analyzing Bribery & Corruption
Our approach to assessing and financializing bribery and corruption risks requires deep research and a focus on ongoing active engagement.
Learn More →Analyzing Modern Slavery
We present an industry risk assessment matrix, along with a guide for research and engagement on organizational risk.
Learn More →Managing Climate Risk
Climate change risks and opportunities are increasingly fundamental considerations as we focus on the long-term sustainability of a business.
Learn More →The Pzena Opportunity List
Our Opportunity List seeks to identify where engagement on material ESG issues could have a positive impact and improve financial outcomes.
Learn More →Utility of ESG Scores
Our analysis found that a company’s potential for ESG improvement has a much stronger relationship to investment performance than the company’s ESG score.
Learn More →Energy Investments in a Zero-Carbon World
We examine the risks and opportunities presented by the transition of the energy sector.
Learn More →Industry Perspectives
We offer an overview of the critical ESG issues relevant to certain industries (i.e., auto, oil services, utilities), developed as part of our proprietary research process.
Learn More →Quarterly Insights
Reporting
Policies
Signatories
![](https://www.pzena.com/wp-content/uploads/2024/07/esg-team-rachel-segal.png)
Rachel Segal
Head of ESGMs. Segal joined Pzena Investment Management in 2019. Previously, Ms. Segal was a senior associate in ESG at BNY Mellon. She also worked as a sustainability consultant for both PwC and Kantar Consulting. Ms. Segal earned a B.A. from Cambridge University and an M.A. from The Johns Hopkins School of Advanced International Studies (SAIS).
![](https://www.pzena.com/wp-content/uploads/2024/07/esg-team-anna-doran-1.png)
Anna Doran
Senior ESG Reporting AssociateMs. Doran became a member of the firm in 2017, and has since held several roles at the company. Previous to her work on the ESG team, she was the Research Team Assistant for 3 years. Anna earned a B.S. in Environmental Science from Union College and a Master’s of Science from the Columbia University School of Professional Studies in Sustainability Management.
![](https://www.pzena.com/wp-content/uploads/2024/07/esg-team-chris-shin-1.png)
Chris Shin
ESG Research AnalystChris Shin, ESG Research Analyst. Mr. Shin became a member of the firm in 2024. Prior to joining Pzena Investment Management, Mr. Shin was an FP&A Senior Analyst for LISC, a national non-profit lender. Prior to that, he held analyst roles at several impact investment funds. He is also an Intelligence Officer in the U.S. Air Force Reserves. Mr. Shin earned a B.A. in Public Policy from Princeton University.
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The information on this website is intended for institutional investors and consultants to institutional investors. It is published for informational purposes only and does not purport to address the financial objectives, situation or specific needs of any investor. If you do not qualify as an institutional investor or consultant, the information shown on this site may not be relevant or appropriate for you.
For UK Investors Only:
The information on this website is intended only for professional clients and eligible counterparties as defined by the Financial Conduct Authority (FCA) and should not be relied upon by other persons, such as Retail Clients, as outlined under the FCA’s Rules. The definitions can be found on the FCA website at www.fca.org.uk . Pzena Investment Management, Ltd. (“PIM UK”) is a limited company registered in England and Wales with registered number 09380422, and its registered office is at 34-37 Liverpool Street, London EC2M 7PP, United Kingdom. PIM UK is an appointed representative of Vittoria & Partners LLP (FRN 709710), which is authorised and regulated by the FCA. Past performance is not indicative of future results. The value of your investment may go down as well as up, and you may not receive upon redemption the full amount of your original investment. The views and statements contained herein are those of Pzena Investment Management and are based on internal research.
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In Switzerland, the information on this website is intended only for qualified investors according to art. 10 para. 3 and 3ter CISA
Investment Professionals - Important Legal Acknowledgement
The information on this website is intended for institutional investors and consultants to institutional investors. It is published for informational purposes only and does not purport to address the financial objectives, situation or specific needs of any investor. If you do not qualify as an institutional investor or consultant, the information shown on this site may not be relevant or appropriate for you.
For UK Investors Only:
The information on this website is intended only for professional clients and eligible counterparties as defined by the Financial Conduct Authority (FCA) and should not be relied upon by other persons, such as Retail Clients, as outlined under the FCA’s Rules. The definitions can be found on the FCA website at www.fca.org.uk . Pzena Investment Management, Ltd. (“PIM UK”) is a limited company registered in England and Wales with registered number 09380422, and its registered office is at 34-37 Liverpool Street, London EC2M 7PP, United Kingdom. PIM UK is an appointed representative of Vittoria & Partners LLP (FRN 709710), which is authorised and regulated by the FCA. Past performance is not indicative of future results. The value of your investment may go down as well as up, and you may not receive upon redemption the full amount of your original investment. The views and statements contained herein are those of Pzena Investment Management and are based on internal research.
For Switzerland Investors Only:
In Switzerland, the information on this website is intended only for qualified investors according to art. 10 para. 3 and 3ter CISA
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Andrew Chung, CFA
Principal and Senior Research Analyst
Mr. Chung became a member of the firm in 2014. Prior to joining Pzena Investment Management, Mr. Chung was a senior associate at Dodge & Cox and began his career as a research associate at Sanford C. Bernstein. He earned a B.S.E. summa cum laude in Finance and a B.A.S. in Computer Science from the University of Pennsylvania. Mr. Chung holds the Chartered Financial Analyst designation.
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