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Demand is pushing asset managers towards sustainable investing

New research by the Financial Times highlights the growing momentum behind sustainable investment opportunities for asset managers.

In a survey of 232 investment professionals worldwide, two themes stood out. Firstly, the pre-pandemic shift toward sustainable investments has turned into a stampede.

Secondly, investment firms are beefing up and diversifying their teams with a particular emphasis on creating a mix of experience and skill sets in environmental, social and governance (ESG) and data skills.

Whilst sustainable investments present many asset managers with new challenges, the research points out that the surge in ESG products creates genuine growth opportunities.

Research from PwC also suggests that institutional investors expect a greater convergence of ESG and non-ESG products together in 2022, with 77% expecting to drop non-ESG products altogether.

Demand for ESG products saw record inflows even before the pandemic, and the ensuing crisis has acted as an accelerator. According to the FT report, 46% of those surveyed said they are integrating sustainability into their investment decisions to meet demand, whilst a further 45% are doing so in response to increased stakeholder pressures.

This demand is being reflected in the amount of emphasis asset managers are stressing on the need for good ESG data upon which they can base their investment decisions.

“Just buying some data or ratings and disseminating to portfolio managers is not an integrated or long-term approach,” said Vincent Mortier, Group Chief Investment Officer, and Member of the General Management Committee, Amundi.

So, just as asset managers are re-evaluating their investment decisions, companies listed in Hong Kong will come under increasing scrutiny as the newly introduced obligations on fund managers of collective investment schemes requiring them to take climate-related risks into consideration in their investment and risk management processes and make appropriate disclosure by the Securities and Futures Commission (SFC).

This increased scrutiny will undoubtedly lead to increased pressure on companies in which they intend to invest in and therefore the value of an accurate and data driven ESG report will become even more important in the years to come.

Whilst the new rules mainly affect Institutional Investors at first, as sustainability and ESG factors become more mainstream, there is a higher likelihood of retail investors likewise asking more questions about funds that they invest in.

The more aware investors are, the more onus is on companies to produce relevant and accurate ESG reports.

Engaging a reputable consultant, such as Ascent Partners, to prepare your annual ESG report will therefore become increasingly important as investors dig ever deeper into a company’s ESG credentials.