The majority of professional fund buyers are confident there is alpha to be found in ESG investing, which they believe will become mainstream within the next five years.
The Natixis Investment Managers global survey of 200 fund buyers – those responsible for selecting funds included on private bank, insurance, fund-of-fund and other retail platforms – found that two-thirds (67 per cent) of fund buyers surveyed said they agreed that including ESG factors will be standard practice for all investment managers within five years.
Half (49 per cent) believe that ESG factors are important in their organisation’s current manager selection process, and two-thirds say they will increase their allocation to ESG strategies in 2019.
More than half (57 per cent) contend that there is alpha to be found in ESG investing.
Louise Watson, managing director for Natixis Investment Managers in Australia, said fund buyers are increasingly incorporating ESG considerations into investment decision-making and analysis to align investment strategies with their organisational values.
“Investment managers are in a powerful position to drive change by choosing where they invest,” Ms Watson said.
“ESG investing is now mainstream – and growing stronger every year, with many local funds appointing dedicated ESG teams to respond to member demand. ESG themes offer attractive opportunities from an investment perspective but also in terms of social responsibility.
“Offering more retirement plans integrating ESG criteria could entice investors to save more, help to improve pension funding, and could lead to greater retirement security.”
Matthew Shafer, head of global wholesale at Natixis Investment Managers, said appetite for ESG is growing stronger every year as investors increasingly seek to reflect their personal values in their portfolio strategies, and the longer-term return benefits of sustainability are being more widely recognised.
“However, we do hear and share fund buyers’ concerns about ‘greenwashing’,” he said.
“Robust and clear taxonomy, labeling standards across the industry and across jurisdictions, and transparency around ESG reporting are critical to maintaining the integrity of ESG investment products. As a leading active manager, we have high conviction and we consider that engagement with management around ESG factors and exercising voting rights accordingly are part of active investing and long-term performance.”
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