May 14, 2018 / News

Wealth managers expect ESG strategies to flourish

By Sebastian Creek, Portfolio Adviser

Two thirds of professional investors expect to allocate more money to ESG strategies in the next three years, Royal London Asset Management has found.

Wealth managers expect ESG strategies to flourish

Two thirds of professional investors expect to allocate more money to ESG strategies in the next three years, Royal London Asset Management has found.

The asset manager surveyed about 100 wealth managers, financial advisers and institutional clients and found that 65% expect to increase their allocation to ESG.

More than 70% of respondents said ESG issues were now ‘somewhat’ or ‘very’ important to them when selecting an investment strategy or fund manager.

The findings come amid AGM season, which has already seen shareholder restlessness over corporate governance.
RLAM recently voted against sky-high executive pay packages at Persimmon, and activist group Shareaction has targeted Schroders and Man Group for their gender pay gaps.

Client-driven demand
Rob Williams, chief distribution officer at RLAM, said the survey findings reflect discussions the firm has had with clients over the past year, and show that ESG is becoming an integral part of the investment process for many advisers and institutions.

“As the sector becomes increasingly competitive, we think that advisers will begin to dig much deeper into what these approaches really mean for the underlying funds,” he added.

“The debate is already shifting rapidly from whether a fund simply considers ESG issues, to a more sophisticated discussion about how investment strategies implement these considerations on a practical level. We think that fund management firms have an important role to play in helping advisers get to grips with investing sustainably, and helping them to educate their clients on the tangible benefits that this can provide.”

Inflation concerns
RLAM’s survey also found rising interest rates and inflation was the biggest concern for investors with two fifths (40%) saying it was a threat, up from 26% in 2017.
However, investors appeared less fazed by Brexit with just 11% viewing it as the biggest threat, down from 22% in 2017.

Favoured asset classes
More than half of respondents (55%) backed equities as their preferred asset class, a slight drop from 58% last year.
Just 25% of investors saw bonds, cash or absolute return as their favoured asset class during 2018, a small change from the 23% who opted for one of these in 2017.

Within fixed income, most respondents favoured multi-asset credit (27%), followed by high-yield bonds (24%) and investment grade (23%).