Many ESG offerings 'just marketing', says fund manager

Many ESG offerings 'just marketing', says fund manager

Many fund and portfolio offerings coming to market are described as environmental, sustainable and governance (ESG) compliant simply for “marketing reasons”, according to Alex Odd, founder and chief executive of investment firm Tyndall.

Odd, a former fund manager at Jupiter and M&G, said every fund manager should care about the sustainability of a business and how it is governed, without the need to brand it ESG.

Odd said: “The global fund we have here, we could if we wanted say it is ESG compliant, and we could actually back that up by showing the holdings in the fund.

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"But it is not an ESG mandate and to say it is would not be honest.

"But actually if you break down the E, the S, and the G, well the S and the G, every fund manager should care about the sustainability of a business, and about how it is governed. But as those things should be part of the normal process, I don’t think it’s right that a fund is ESG for doing those things.”    

Odd's new firm was launched in 2017 and has about £500m under management, split across a range of three funds, a discretionary fund management business for private clients, and a recently launched investment management service targeted at financial advisers. 

Minesh Patel, an adviser at EA Financial Solutions in London, said: “This issue of product providers labelling products ESG is a very significant one. We call it greenwashing.

"Lots of them use the justification of being focused on the governance, but to be honest, that is just due diligence, which all fund managers do anyway. I think there needs to be more clarity on how they are being ESG compliant, rather than just saying they are.” 

Odd said the biggest challenge he faced when launching the company in 2017 was convincing people to have confidence in his ability to manage the money, and also confidence that the firm would survive.

He said: “When we launched, there was no pot of legacy assets, we had a few Isas and one Sipp. It was a single person firm with a single product, and there was no real ambition to be more than that.

"If we had been able to get to £10m of assets I would have been very happy, then when we got to £10m, I would have been very happy to get to £50m.

"The firm was founded out of my frustration at how things were run at big firms where I had worked. I think the fund management industry was becoming more homogenised, with more and more products that just aimed to match the index plus a few per cent of performance on top of that.

"The bigger firms have a lot of committees and I just wanted to run money without having to deal with committees.” 

Consolidation has been a feature of the wealth management industry in recent years, with one of the consequences being that there are a smaller number of fund buyers, each of whom have more capital to invest, and so buy a smaller number of funds.