Investment managers’ ability to deliver alpha — that is, non-market-driven investment returns — is ever diminishing, as illustrated in Institutional Investor’s September cover feature “Is Alpha Dead?” But at least one hedge fund manager thinks it has a fresh edge. New York–based hedge fund and alternative investment firm Mariner Investment Group believes there is value to be found in monitoring how companies handle issues relating to ESG: the environment; social responsibilities, such as human rights and employee diversity; and corporate governance.

ESG metrics have traditionally been viewed by the institutional investment community as nonfinancial factors not directly relevant to companies’ bottom lines. Whereas institutional investors are starting to pay more attention to ESG, with environmental-related concerns getting particular notice, it is still rare for money managers in general and hedge fund managers in particular to make ESG integral to their investment process.

Most money management firms that practice so-called socially responsible investing tend to focus on equities. Mariner is among a handful of firms that are starting to view the investment landscape very differently and see opportunities in using ESG analytics not just in equities but also across the entire investment universe.

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