Aegon’s Ryan: ESG is a paradigm shift not a bubble

After two decades of running the Aegon Ethical Equity Fund, Audrey Ryan gives her take on key market concerns

Audrey Ryan, manager of the £620m Ethical Equity Fund for over 20 years, has said the way we consume and choose products has entered “a paradigm shift” that will be a long-term driver of flows into sustainable investments.

Dismissing fears that ESG investing is in a bubble, Ryan (pictured) said there have been a series of changes in recent times that have made consumers more aware of the environmental challenges we face and therefore investing responsibly is not a short-term trend.

Speaking on a panel debate titled The Future of Responsible Investing, she said: “I don’t believe ESG is a bubble or a fad, it is here to stay, and we will see further flows in this space. I have been doing this over two decades, but we continue to deepen our knowledge and better understand the risks and opportunities.”

She agreed some areas of the market had risen quickly and looked “expensive”, pointing to clean energy stocks but added these had already corrected from a share price perspective.

At the same time, Ryan said, demand is still there and believes over a medium- to long-term view there is a “structural tailwind driving areas such as renewables, electric vehicles, healthcare and hydrogen”.

“There has been a paradigm shift in the way we consume products and generate energy” she said at the virtual event. “There will be a very big difference in the years to come in the products and services we use, and these patterns will continue to evolve and grow supported by government and regulation promoting ESG initiatives.”

Ryan also said lots of international growth companies that are moving in this direction and reflecting demand for better ESG credentials indicating that the investment opportunities are always growing.

Social

The fund manager also echoed the sentiment the Covid-19 pandemic led investors and the general public to focus on the ‘social’ element of ESG and commented that this will continue.

“Covid has taught us many things but also demonstrated that change can happen when it is necessary. We saw positive collective action for good providing us with momentum for future change.

“There has been an increased spotlight on the social element – but it is important to note it has not been at the expense of the E or G.

“We are seeing increased focus on all stakeholders not just shareholders and increased activity on this in our own engagement. We asked what companies are doing in terms of health and safety, diversity and inclusion, supply chains, mental wellbeing.

“I think we will continue to see policy reform and increased transparency in this area.”

Over three years to 9 June, the Ethical Equity Fund has returned 16.6%, compared to the IA UK All Companies sector average return of 11%, according to FE Analytics.

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...