ESG Investing  

Hold fund managers to account over ESG claims, says Quilter

Hold fund managers to account over ESG claims, says Quilter

The head of responsible investment at Quilter Investors has encouraged investors to hold fund managers to account over the validity of ESG investments.

Eimear Toomey, head of responsible investment at Quilter Investors, said popularity of ESG investments has exploded in the past years, which was encouraging as many investors were not simply seeing it as a fad but wanted to make a real difference.

But she warned of greenwashing, which she said threatened to "undo all the good work and progress that has been made so far in responsible investing."

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Toomey called on investors to proactively challenge the funds they are looking to invest in.

"It is crucial that fund groups invest in the way that they say they will, so it is important investors hold them to account on this," she said.

“Demand is not going away anytime soon, and we are going to continue to see a proliferation in ESG investments, and as such it is vital investors do their homework and understand what it is they are investing in."

She added: “Doing the research and finding out how your managers are investing responsibly, what they are holding and how this could make a difference will allow you to make an informed decision and give you the confidence to invest in a responsible manner.”

According to NextWealth's latest ESG Tracker Study, out last month, an average of 15 per cent of client assets are invested in ESG or sustainable, ethical or impact funds and solutions, an increase on the 12 per cent invested in these assets a year ago.

Quilter said that flow into ESG products was likely to continue to grow, as it found 56 per cent of investors are likely to consider responsible investing either more than they do now, or to start at some point in the future.

But it found that greenwashing was investors’ main concern when it came to responsible investing - investments not being what they are claimed to be was identified by 44 per cent of investors as their biggest worry.

The fear over greenwashing was followed by concerns around higher fees and costs for those products (42 per cent), and whether those investments would perform better than traditional portfolios (38 per cent).

Jason Hollands, a managing director at Tilney, said the problem with ESG investing was the sharp rise in popularity of sustainable investing over the past few years.

"This has been one of the most active areas for new product launches over the last few years, which in one sense is great news because it gives more choice," he said.

"But when you delve beneath the surface and try to look at what really is going on, the market literature is quite light on details - every fund company wants to move into this space because it is an area of structural growth. 

"I don't think [greenwashing] is a looming scandal but I do think there's an element of superficiality out there because so many things are claiming to take an ESG approach. Only time will tell which ones, under scrutiny, demonstrate they have a thorough approach."