Investments  

Sustainable multi-asset investing needs simplifying

This article is part of
Guide to sustainable multi-asset investing

"At Rathbones we use Greenbank, a firm within the business who are ESG specialists, and who have a veto on all of the investments we make in our sustainable multi-asset funds; they have been around for 20 years.”

Simon Holmes, multi-asset investor at BMO Global Asset Management, says: “Greenwashing is a very important issue because if clients see too many instances of it, then it would really harm the long-term prospects for sustainable investing.

"I think the key to finding funds that are doing it properly is transparency: what are they disclosing, and how are they disclosing it? And really it is likely that the firms that have been doing this for a while are the ones who will be transparent.

"The next question to ask is about how big the teams are that are doing this, and how much resource is assigned to it.”

Standardisation 

Clark Fenton, manager of the Diversified Return fund at RWC Partners, says: “Just as multi-asset is a broad term, which can be a misleading label, unfortunately, the same can be said for ESG and sustainability. 

"Until standards are better defined and agreed upon, investors will have to do more work to dig into funds’ underlying investments and processes to vet those which are genuine. Managers’ transparency of their processes and portfolios can facilitate investors’ assessment; opacity and obfuscation are warning signs."

John Fleetwood, director of sustainable and responsible investing at consultancy Square Mile, says the best approach is to “look at the evidence, look at the underlying companies that are being invested in and whether that matches the rhetoric of what the firm is saying”. 

Maria Municchi, fund manager at M&G, says: “There are efforts such as the EU taxonomy to build a framework to provide investors with a common language to make different investment approaches more comparable. Another way to help with comparing funds is to look towards external fund labels and third-party sustainability databases such as Morningstar, Fund EcoMarket or 3D Investing to better understand a specific fund approach.

"Last but not least, a detailed ESG/sustainability policy published by the fund manager could be a useful document for investors, providing information on the non-financial objectives, the responsible investment approach adopted to achieve them, and the criteria used to implement it (such as carbon footprint, alignment with sustainable development goals, minimum ESG thresholds etc).

"I believe that, while sustainable investment continues to evolve, transparency and communication regarding the fund’s criteria, approach and expected outcomes is crucial. For example, for our sustainable multi-asset strategies we publish a document describing our ESG and impact criteria as well as an annual report with details on the sustainable characteristics of our positive impact holdings and overall portfolios.”