Managers see assets in ESG funds rocket

ESG has become a key focus for asset management firms as most have recognised the trend

ESG growth among the world’s 500 largest asset managers has soared nearly 25%, bucking the trend of declining growth in overall assets, a leading industry survey reveals.

The latest Global 500 survey, from investment research group the Thinking Ahead Institute, reveals ESG assets under management (AUM) jumped 23.3% in 2018 to just over $1.4 trillion – up from $1.19 trillion in 2017.

In addition, assets allocated to ESG principles by the top 500 fund managers increased by nearly a fifth (17.8%) during the same period to $8.8 trillion.

This is in stark contrast to the growth in overall AUM, which decreased 3% to $ 91.5 trillion in 2018.

The decline has been blamed on the continuing benign investment environment, with fee compression, high cost of technology and regulatory pressures being contributing factors.

While equity and fixed income continued to dominate asset manager portfolios in 2018, making up 78% of all assets, equity asset growth, including REITS, was down to 9.4% to $21.2 trillion year-on-year, while fixed income decreased 0.5% to $16.81 trillion.

However, according to the survey, ESG has become a key focus for asset management firms, with client interest in sustainable investing, including voting, increasing across 83% of the firms surveyed.

Bob Collie, head of research at the Thinking Ahead Institute, said: “Sustainability has now become an unavoidable issue and talk on sustainability is becoming action. There is obviously a saying-doing gap in a lot of places, but perhaps more important right now is the doing-impact gap: our ability to create a more sustainable economy lags behind the desire. The most meaningful efforts on this front are the ones focused on closing that gap.

“There is also a growing appreciation of the importance of culture. Good culture does not appear by accident, and our ability to assess and adapt it is developing. There’s room for improvement here,” Collie added.

BlackRock remains the largest asset manager in the rankings, according to the survey, a position it has held since 2009, with $5.9 trillion AUM at the end of 2018, followed by Vanguard Group and State Street Global.

AUM growth by region ranged from -4.9% in North America to 17.9% for the rest of the world, while Europe experienced a decline of 3.9%, according to the survey findings.