Asset managers unable to evidence tangible ESG action

More than four in 10 (43 per cent) asset managers are unable to provide an example of a sell decision driven by an environmental, social and governance (ESG) view in the past 12 months, Redington’s annual Sustainable Investment Survey has revealed.

The research, which surveyed 122 managers covering 232 strategies, found some "encouraging signs", as almost every manager surveyed (98 per cent) had a firmwide ESG policy.

In addition to this, the survey found that 78 per cent of equity managers and 84 per cent of fixed income managers said that environmental issues impact analyst recommendations in most cases.

However, despite these good intentions, the survey found that 35 per cent of managers can’t evidence an ESG-motivated buy decision, up from 29 per cent in 2021, while 57 per cent of surveyed managers have an exit strategy to respond to negative ESG performance.

Redington also reported that the number of firms aligning remuneration policies with sustainable investment metrics has fallen to 62 per cent, compared to 70 per cent in 2021.

However, Redington head of manager research, Nick Samuels, suggested that "perhaps the clearest indication that sustainable investment is truly integrated is if individuals are incentivised on it".

"We believe this approach has potential to drive significant progress, and so we hope to see a reversal in this downward trend next year," he continued.

Redington suggested that the investment industry at large must collaborate with the asset management community to promote and effect change, with Samuels stating that the "interconnectivity between the financial system, society and the planet are increasingly clear".

He continued: “For asset managers, being a responsible steward of capital means creating long-term value for clients and their beneficiaries – and one way to do so is through thoughtful engagement on material topics.

“What matters the most here is changing investment practices on the ground. So while it is encouraging to see managers making such strides in their processes and philosophies, there is a long way to go when it comes to taking actions for real-world outcomes that are truly going to move the dial on some of the most challenging sustainability issues of our time.

“While our survey evaluates the sustainability and stewardship efforts of asset managers, the responsibility does not lie with them alone.

"Through this survey, and in collaboration with our clients, partners and industry peers, we hope to catalyse the large-scale action required to solve the sustainability challenges we all face.”

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