Asset managers have been investing heavily into ESG integration across their businesses with almost 40% expecting to have completed this by 2025, according to research from Square Mile.
The investment consultant and research firm surveyed responses from 59 fund groups that all feature in the Square Mile Academy of rated businesses, to find that 15.5% have declared they have completed their journey on integrating responsible investment (RI), but this is set to triple by the end of 2025. In particular, fund groups are focused on strengthening their teams and internal processes over the next few years.
“Virtually every group said this is a key corporate objective, RI has moved from the appendix to the front of presentations,” said Steve Kenny (pictured), chief distribution officer for Square Mile.
However, he added the fact that the number of groups who said they have “completed” integration is low at just under 16% is a positive.
“It is about progress not perfection,” he said. Furthermore, the report accompanying the survey added while it is imperative asset managers keep up with the rate of change in RI, and the data is useful in benchmarking where firms are, it flagged one respondents’ comments echoing the sentiment: “RI is a journey, not a destination. RI will always evolve and we are committed to continually reviewing and developing its approaches further” and “even the most experienced companies in this space are still learning.”
Kenny also referenced a recent conversation with a fund manager who called the current market “the third age of investment”.
“He said we have the era of greed from the 1920-70s where the focus was all about returns, then from mid-1970s to 2000s investors wanted diversification and flocked into managed funds.
“The third age of investment is responsible capitalism where investors want returns, but not at the expense of harm.”
He highlighted a number of areas where the industry could improve including not using interchangeable language (ESG, responsible, sustainable), and also focusing on the fact that the planet needs responsible investment to continue to exist.
“The industry has made too much of a play about the ‘do good’ aspect of RI and not enough of the economic aspect.
“The amount of money that needs to be spent is off the scaled and will make the industrial and technology revolutions look like a blip. We need the industry to highlight this economics.
“People aren’t totally willing to sacrifice total return for the ‘do good’ portion so we need to highlight the financial relevance and benefit of investing in this space,” he said.
