Fund buyers to increase ESG exposure

Fund buyers to increase ESG exposure

Two thirds of fund buyers plan to increase their allocation to environmental, social and governance (ESG) funds in 2019, according to data compiled by Natixis.

The firm spoke with 200 fund managers, insurers, and wealth managers and found that enthusiasm for ESG strategies is rising, with advisers citing the ability of ESG fund managers to deliver better performance than the market as a whole.

Two thirds of those surveyed said they expect consideration of ESG factors to be "standard practice" for fund buyers within five years, and 49 per cent said it is already a consideration.

The fund buyers said the main concerns they have about investing in ESG funds relate to the lack of long-term performance data for many such funds, and the habit of some companies to engage in what they call "greenwashing".

Greenwashing is the habit of more traditional companies engaging in marketing or public relations strategies in order to appear aligned with ESG objectives.  

Matthew Schafer, head of international distribution at Natixis, said: "Appetite for ESG is growing stronger every year as investors increasingly seek to reflect their personal values in their portfolio strategies, and the longer-term return benefits of sustainability are being more widely recognised.

"However, we do hear and share fund buyers’ concerns about greenwashing. Robust and clear taxonomy, labelling standards across the industry and across jurisdictions, and transparency around ESG reporting are critical to maintaining the integrity of ESG investment products."

Paul Stocks, an adviser at Dobson and Hodge, an advice firm in Doncaster, said: "We haven’t seen an increase in demand from end clients. [ESG] sometimes gets mentioned, and we have one client in particular who asks us to make it central to what we do with him, and we can accommodate that, but really he is the only client we have who has asked us to do that."