As the coronavirus pandemic sheds further light on ESG issues and the need to tackle them through investment, a survey has revealed asset managers are becoming less convinced that they are “pioneers” in ESG investing.
According to the annual Asset Management Trends Report by specialist communications consultancy JPES Partners, the number of managers who believe they are pioneers in ESG has fallen to 17%, a considerable drop from 40% in 2019.
JPES said this “dawning realisation among managers that they may not be the market leaders on ESG they once believed” was “one of the most surprising results” of this year’s survey.
“That said, even the true pioneers are acutely aware of the increased cannibalisation of their space, with one saying that while they were, and are, a pioneer: ‘that doesn’t mean we’re at the forefront of the industry and there is a very real risk of being overtaken,’” the report said.
Meanwhile, some 94% of respondents to the survey are concerned about greenwashing, up nearly 30 percentage points from last year, with managers becoming “concerned that they could be accused of the same if their methodologies and processes do not live up to scrutiny”.
“This rising concern may in part explain the reassessment by firms of their own ESG credentials and where they sit relative to peers,” said JPES.
“It is also leading to a degree of reticence among some managers on what they talk about publicly for fear of sounding like they may be simply jumping on the bandwagon, and therefore possibly even being seen as greenwashing themselves.”
However, despite these concerns, the proliferation of fresh product launches shows no signs of abating, with 78% of managers saying they are planning to launch dedicated new ESG solutions within the next year.
This has clearly been led by the soaring demand from clients, with Morningstar reporting record net inflows of $71bn (£54bn) into ESG funds between April and June 2020, taking the total assets invested in ESG funds to just over $1trn.
Some 89% of managers also said their conversations with clients around ESG have “evolved and deepened over the last year, with far more scrutiny and a greater demand for evidence and analysis”, suggesting that investors will no longer tolerate greenwashing when it comes to ESG investing.
As a result, 83% of respondents said they plan to produce more content on ESG-related topic over the next year, no doubt to support the marketing of new ESG products, even as the same proportion don’t intent to increase general proactive content this year.
The report also found managers are taking a “much more granular view” of specific ESG issues, with 28% saying they are particularly focused on governance, 17% naming climate and 11% citing social issues, though 44% said the are focusing on the full scope of ESG.
Meanwhile, the Covid-19 pandemic and the Black Lives Matter protests in the US have attracted renewed attention to diversity and inclusion issues, with so-called ‘diversity washing’ becoming a key concern for some 94% of communication professionals at asset management firms.
“From ‘atrocious’ and ‘appalling’ to ‘inherently flawed’, the strongest language used by respondents centred squarely on the issue of diversity and inclusion and there was not a single communications professional this year who did not cite issues around diversity as a problem for the asset management industry,” the report said.
Nearly two thirds (61%) of asset managers also said the pandemic will have a wider direct impact not only on their businesses, but also in terms of what, and how, they communicate.
Another key shift is expected to be the increase in remote and flexible working practices, with 94% of investment communications and marketing professionals saying there will be a permanent impact on working practices as a result of Covid-19.
The survey consisted of 18 in-depth interviews with senior in-house communications professionals at global and European asset management firms with more than €9trn in combined assets under management.