The CFA Institute hosted its Alpha Summit, or annual meeting, at the end of May with the tagline, “a meeting of the minds that propels finance forward.” One of the conference sessions titled “The Next Frontier of Sustainable Investing: Measuring Impact” addressed ESG implementation amongst the following panelists: George Serafeim – Charles M. Williams Professor of Business Administration and Faculty Chair of the Impact-Weighted Accounts Project at Harvard Business School Linda Zhang – CEO of Purview Investments Melanie Adams – Vice President and Head of Corporate Governance and Responsible Investment at RBC Global Asset Management Inc. The panelists’ conversation began with reconciling materiality with ESG issues. For instance, water is material for a food and beverage company, while cybersecurity is material for a financial institution. Furthermore, you can drive performance forward inside an organization by improving the organization’s human capital through enhanced workforce diversity. In order to monitor ESG matters, the panelists agreed in their preference of tracking raw data over time, identifying improving or declining trends as opposed to a less optimal reliance on ESG scores. Unfortunately, and as many of us already know, the ESG data space is nascent and does not have the same infrastructure as accounting information. There also tends to be more noise within ESG data instead of indicators, which can be distracting. In order to combat these challenges, the panelists recommend maintaining a sector-specific lens. For example, although technology companies do not have direct emissions, they do have indirect emissions via employees’ frequent travel and keeping data centers cooled. Consensus found engagement as more effective than divestment. Specifically, fossil fuels will be used for years to come and so it’s preferred to have a seat at the table with the companies transitioning from high carbon emissions to low in order to learn about the technologies they will use. This insight will make clear industry leaders and laggards. Moreover, there needs to be “teeth” in an engagement approach. For example, if a company falls short of achieving its carbon emissions reduction goal, then there needs to be a consequence. Time-bound milestones are helpful in monitoring progress. As an investor, given the price you paid for an investment or the current holding price of the investment, quantify the financial and non-financial risks and ensure you are being compensated appropriately. As the session drew to a close, the panelists shared the following ideas for finding purpose in your work, which I found helpful and hope you do too. Position your career for where the growth will be in the industry (e.g., climate change). Wherever there is disruption or innovation is where the opportunity exists for alpha generation. When you do ESG investing right, you can generate alpha, but ESG analysis is challenging and so it needs to be done correctly.