Fund firms still can’t justify ESG claims

Professional investors express frustration about dealing with asset managers on ESG

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Nearly half of all asset managers are unable to offer satisfactory evidence that their ESG approaches have a positive impact on the investment process, despite claims to the contrary, a new poll suggests.

The revelation came from a report released in December from the Local Authority Pension Fund Forum, following a survey of its 79 public sector pension fund members.

It found that 45% if its members felt that asset managers had failed to provide sufficient evidence to back up their ESG claims, while 29% said it was “not easy” to work with their fund manager on ESG-centric engagements.

Paul Doughty, acting chairperson of the Local Authority Pension Fund Forum, described the findings as “worrying” and called on fund firms to improve the level of service that they offer their clients.

“Given the mounting body of evidence showing the financial benefits of good corporate governance, it is worrying that so many of our members see asset managers as underperforming on ESG,” he said.

“With funds placing an even greater emphasis on their asset managers’ stewardship capabilities, the survey shows the industry needs to up its game.”

Respondents to the survey were also asked how likely they were to recommend their asset manager to another investor, based on ESG performance alone. Those polled gave an averaged score of 6.5 out of 10. A score of 6 or less was said to show that the customer was unhappy.

There was better news for asset managers when it came to meeting investors’ needs, however. With 60% of funds saying that their fund manager met their needs “somewhat well” and nearly two thirds (63%) said asset managers were “somewhat effective” at changing ESG behaviours.

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