PA ANALYSIS: Economics of ESG investing driving demand in Europe

A growing number of institutional investors in Europe are embedding ESG analysis in their investment processes in response to regulatory pressure, consumer demand and a rising appetite for new sources of investment signals.

PA ANALYSIS: Economics of ESG investing driving demand in Europe

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While fund managers recognise the importance of ESG factors, there is considerable variation in how these signals are being integrated into the investment process.

Lund says: “Some investment managers have not integrated these processes as well as they could have done.”

It is also difficult to determine how important role ESG factors have played in a particular investment decision, he adds.

While it is primarily institutional investors which are focusing on these factors, the wealth management industry will need to adopt this practice.

Van Hyfte says: “Demand is coming from consumers with more than 80% of millennials wanting managers to incorporate the ESG factors into the investment process.”

But it will take time before a focus on ESG becomes a part of the mainstream fund selection process. At the moment, there are more important criteria which need to be matched to appeal to a broad client base.

“This will change over time, however, as momentum builds behind this trend,” Van Hyfte says.