September 25, 2019 / Analysis

How ESG fund managers can stand out from the crowd

By Abtin Pourgive, Portfolio Adviser

Last Word Research asked 110 fund buyers what they want from ESG funds

How ESG fund managers can stand out from the crowd

In Q4 2018, Last Word Research surveyed 110 of the biggest wholesale fund selectors across 20 European countries and asked them about their attitudes to, and usage of, ESG investments.

The following charts are a selection of the highlights.

Almost half of our survey respondents take ESG factors into account for every portfolio when making fund selection decisions. Most of the rest will do so when asked (see chart 1).

What is worth noting is that very few never consider ESG factors. It seems therefore unlikely that ESG will lose its importance any time soon.

For a remarkable 94% of investors, the most important action fund managers can take when it comes to talking about their ESG credentials is clearly defining what ESG means to them (see chart 2).

Over four-fifths of respondents also wish to see fund management houses putting good corporate responsibility at the heart of their investment decision-making and backing this up with examples.

Having a centralised ESG policy and explaining it in-depth within fund factsheets are also considered important steps fund managers could take.

Positioning for the future

As for future allocations, two-thirds of investors expect to add to their ESG-themed and ESG-compliant core equity positions (see chart 3).

Even for the specialised impact funds sector, more than half of respondents wish to buy more, so there is huge demand for everything ESG.

These sentiments compare favourably with the current jittery macro outlook and at best subdued appetite for mainstream asset classes, thus presenting plenty of potential.

A note of warning for fund groups: six in 10 respondents say they don’t foresee having a long-term relationship with a group that refuses to engage with ESG factors (see chart 4).

Abtin Pourgive is head of research at Last Word

To read the full report, which contains more insight and in-depth commentary, please email Allan Goodridge at [email protected]

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