Following this week’s Fund Forum ESG and Impact event in Amsterdam, Fundeye takes a look at where the industry is with environmental , social and governance (ESG) issues and how this growing investment theme might be developing.
Throughout this week’s conference, there have been debates on to what is meant by ESG and how firms have tried to incorporate some of its principals into its products. Holly Mackay, founder and CEO of Boring Money held an amusing presentation where she called on the industry to be less concerned about what their rivals are doing, suggesting that they should concentrate on getting their own message out.
The issue of semantics regarding ESG was a common theme during the event, with many seeking to distinguish the term ‘impact investing’ from other forms of responsible investing. It was said on more than one occasion that some view ESG investing in the same way as ethical funds from the 1980s and 1990s. These type of products where usually associated with giving up some returns in order to achieve some societal goal and is far from where the industry is now.
Ian Simm, founder and CEO of Impax Asset Management, told Fundeye that his firm’s suite of sustainable funds were as much for the ‘red blooded capitalist’ as they were for those with strict ethical values, dispelling the myth that sustainability has to come at the expense of returns.
At this week’s event, others voiced similar concerns, not wishing their ESG products to be tarred with same brush as ethical, not great performing funds of yesteryear.
There were some, like NN Investment Partners Jeroen Bos who made distinctions between various types of responsible investing. Sustainable investing was considered a ‘do no harm’ approach, whereas impact investing meant that the companies invested in were actively doing some good.
Others weren’t as keen on this neat separation of ESG styles, with one figure from a leading Swiss financial institution telling Fundeye that impact investing should only be used when a company cannot make it’s difference without the direct investment from an individual. If they can, they are just themed equity products, no more.
This question of semantics appears a crucial one in the ongoing debate on ESG as many accuse some in the industry of ‘greenwashing’ their products, or making them appear ESG when on closer inspection they really aren’t.
One solution posited was to have a single set of ESG data points for the companies around the world although certain analysts raised doubts on the feasibility of such an exercise. Companies such as RepRisk provide a growing number of clients with ESG scores they have gleaned from various sources due to the lack of mandatory reporting in this area and one of the company’s members said that clients are ‘sticky’ in that they don’t want to change data provider often.
As the appetite for ESG looks set to keep increasing, these themes will no doubt be touched upon again but the industry seems geared up for a seismic shift in how it views responsible/ethical investing.
