We believe that the proper way to evaluate a business is on impact. Every business has an integrated impact on the world. Thus, focusing on financial statements and evaluations can only take advantage of a limited proportion of the information. Every factor influenced by the business will eventually show its effect on the return and thus focusing on creating the best impact is the only way to achieve the highest return.
It is universally agreed that ESG went far beyond compliance. It can completely reshape a business by influencing its risks, opportunities, and financing cost. The reason why ESG is so powerful is that it helps investors to quickly grasp the majority of factors of the impact besides financial return. We consider ESG + financial return as an efficient way to estimate the impact, but will still keep eyes on the other factors we consider to be influential based on each business.
It is nearly impossible to know everything influenced by a business and how it eventually determines the impact, but we can study its direction. We went from “what is expected to happen” to “the world will reach a new expected condition, so something must happen”. Early investments in the New Energy Vehicle sector is a typical case with the thematic view. Even the incentive policies were not issued yet, human beings should switch to renewable energy in foreseeable future, so something must show up to compensate for the excellent impact of the Investment.