RI could and should be complementary to traditional investment selection processes embracing their alpha-generating and risk diversifying properties.
Within the Fixed Income narrative of Fulcrum’s top-down investment philosophy, the portfolio manager actively manages duration, fx, credit, yield curve and cross-country exposures and their respective risks. The assessment of ESG risk and opportunity profiles thus comes as a natural component of the continuous in-depth macro strategic analysis when risk allocation decisions arise.
At the epicentre of the investment selection process one would find conviction and dispersion (especially in an absolute return context) that goes hand in hand with market volatility and investment horizon alongside market conditions (depth, liquidity, bid/offer spread etc). ESG risks will be revealing themselves and assessed appropriately when defining trade conviction, as a reflection of the risk and reward profile, under different holding periods.