ESG-Conscious Money Managers Are Pension Funds’ Top Consideration

Pension funds and insurers are now looking for more socially responsible money managers.

According to a recent global poll conducted by Bfinance, over 60% of pension funds and insurers said they were unlikely to hire an equity manager who is not a signatory of the Principles for Responsible Investment, the world’s biggest industry body for sustainable investing, Bloomberg reports.

The survey also showed that about a third of respondents wouldn’t appoint a hedge fund manager that lacked gender or ethnic diversity on staff. A fifth of those surveyed even highlighted environmental, social, and governance concerns as the main reason for having fired managers.

Money managers are facing greater pressure to direct capital toward toward investments that support a greener and fairer society. Over the past year, the disproportionate impact of the coronavirus pandemic across the world, along with green policy initiatives in markets like Europe, have helped bolster demand for investments focused on sustainability.

“There’s a wider trend in ESG where much more consideration is given to the impact portfolios have and how to understand that,” Kathryn Saklatvala, head of investment content at Bfinance, told Bloomberg. “ESG before was ethics, then it was about risk management, then about an opportunity for long-term performance and now it’s moved toward what impact is the portfolio having.”

The increased interest for ESG considerations has also translated to higher investment demand for ESG-related strategies. Looking ahead, ESG assets are on pace to exceed $53 trillion by 2025, according to Bloomberg Intelligence projections.

The survey also revealed an ongoing challenge within the field. There are currently no standardized ESG criteria across the industry. Over 80% of respondents said that finding consistent ESG reporting across asset managers and asset classes remains a challenge.

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