Asset managers are paying more attention than ever to the ‘S’ in ESG, largely as major clients increasingly value diversity, a recent report from Cerulli found.
According to the firm, 37% of asset managers currently provide or are working on products focused on equal employment opportunity, diversity and gender issues. Further, a third of them are developing or already have investment products that address affordable housing, community development or fair labor. More than half of asset managers also have strategies that cover DE&I and community economic development from an impact investing standpoint, Cerulli found.
As examples, exchange-traded product providers including SPDR, Barclays and ImpactShares have offered strategies focused on gender diversity and women’s leadership. Last month, Hypatia Capital launched its Women CEO ETF, and BNY Mellon filed a prospectus with the Securities and Exchange Commission for a forthcoming Women’s Empowerment ETF. There are also numerous gender-equity funds on the market, the oldest of which being the $771m Impax Ellevate Global Women’s Leadership Fund, launched in 1993.
Such products are available to retail investors – but there is significant demand coming from institutions, Cerulli found.
Among asset owners, those with targeted allocations to ESG and impact are prioritizing health care (56%), education (50%), DE&I (47%) and housing and community development (42%), according to the report.
Asset owners are also increasingly considering hiring financial services providers partially on the basis on being minority- or women-owned. Among institutions, 28% report having hired a diverse-owned asset manager. About 16% of institutions also said they have signed the CFA Institutes DE&I Code that was established last year, with another 20% planning to over the next two years, according to Cerulli. Those rates were identical among asset managers.
However, 90% of asset managers surveyed said their firms provide training and development as a way to help encourage diversity at their workplaces, the survey found. Additionally, 88% said they offer competitive parental leave, and 86% said they have inclusive retention and support systems.
But there is less support at the board level, with 53% of asset management firms requiring at that least one board member be a woman, and just 34% requiring a board member to be from a minority group.
Further, only 20% of asset managers said they have provided voluntary diversity assessment reports to the SEC, with another 20% planning to do so over two years.
The data in the report comes from two surveys conducted by Cerulli, one being of 49 asset managers queried in second quarter of 2022, and another of 200 institutional asset owners surveyed in the third quarter.