Investors are twisting hedge fund managers' arms into implementing ESG
21 February 2020 London
Image: Shutterstock
The majority of hedge funds have a well-developed environmental and social governance (ESG) strategy in response to investor demands, according to new market research.
A survey involving 135 institutional investors, hedge fund managers and long-only managers with total assets of $6.25 trillion in 13 countries, found that 59 percent of hedge fund managers are either at the ‘mature’ or in ‘progress’ stage of implementing ESG.
Only 10 percent of those surveyed said they had ‘no [ESG] implementation to date’.
The research was published by KPMG, the Alternative Investment Management Association (AIMA), Chartered Alternative Investment Analyst Association (CAIA) and CREATE-Research.
According to the survey, investor demand was the key driver for buy-side members embracing ESG, with institutional investors accounting for 85 percent of demand for ESG-oriented hedge funds.
However, the survey also found that only 55 percent of hedge fund managers have embedded ESG factors across their strategies.
It was further revealed that although the majority of respondents are embracing ESG to varying degrees, it’s so far unclear whether they believe ESG policies are able to work in harmony with, or supplement, alpha seeking strategies.
Just under half (47 percent) of respondents described their attitude to ESG as ‘sceptical’ compared to 25 percent who said they had an ‘opportunistic’ take on it.
The majority of respondents pointed to a lack of robust templates, consistent definitions and reliable data as the main factor hampering further progress in ESG strategies.
In a blog post commenting on the research, AIMA CEO Jack Inglis argues that hedge funds are “very well positioned to benefit from a future defined by ESG, and they are more than capable of overcoming challenges in moving towards full-scale adoption”.
“While certain strategies might not fit simply within an ESG framework the overall direction of travel in the industry is clear and managers are responding actively to meet their clients’ needs,” he adds.
A survey involving 135 institutional investors, hedge fund managers and long-only managers with total assets of $6.25 trillion in 13 countries, found that 59 percent of hedge fund managers are either at the ‘mature’ or in ‘progress’ stage of implementing ESG.
Only 10 percent of those surveyed said they had ‘no [ESG] implementation to date’.
The research was published by KPMG, the Alternative Investment Management Association (AIMA), Chartered Alternative Investment Analyst Association (CAIA) and CREATE-Research.
According to the survey, investor demand was the key driver for buy-side members embracing ESG, with institutional investors accounting for 85 percent of demand for ESG-oriented hedge funds.
However, the survey also found that only 55 percent of hedge fund managers have embedded ESG factors across their strategies.
It was further revealed that although the majority of respondents are embracing ESG to varying degrees, it’s so far unclear whether they believe ESG policies are able to work in harmony with, or supplement, alpha seeking strategies.
Just under half (47 percent) of respondents described their attitude to ESG as ‘sceptical’ compared to 25 percent who said they had an ‘opportunistic’ take on it.
The majority of respondents pointed to a lack of robust templates, consistent definitions and reliable data as the main factor hampering further progress in ESG strategies.
In a blog post commenting on the research, AIMA CEO Jack Inglis argues that hedge funds are “very well positioned to benefit from a future defined by ESG, and they are more than capable of overcoming challenges in moving towards full-scale adoption”.
“While certain strategies might not fit simply within an ESG framework the overall direction of travel in the industry is clear and managers are responding actively to meet their clients’ needs,” he adds.
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