Companies such as utilities, railroads and energy pipeline firms offer unique appeal for ESG-minded investors.
The team is also seeing potential for gains among certain listed infrastructure companies in emerging markets such as Chile and China. “Emerging-market equities have generally struggled to keep pace with developed-market equities over the past few years. Yet these companies are really well positioned in terms of the social and environmental impact potential in front of them,” Foshag says.
The Principal team works actively to ensure its portfolio companies are aware of ESG best practices among its global peers and are appropriately incentivized to deliver on ESG and diversity targets—targets that are driven by the diversity profiles of each company’s customer base. The team also identifies ways for these companies to enumerate their ESG credentials, such as net-zero carbon emissions, to other investors and third-party ratings agencies.
“We push our portfolio companies to make progress in these areas because it’s the right thing to do,” Foshag says, “but also because we believe it will help their stock price better reflect the good that they’re doing on sustainability and ESG.”
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