Sustainable investment, a 'tectonic movement' in asset management
After investors’ shift from active to passive investment, the next “tectonic movement” in the asset management industry will be sustainable investment. “This is what we are experiencing right now, this inexorable and undeniable movement towards ESG and impact investment,” said Steven Blackie, global head of product strategy at Aviva Investors, during a panel discussion on the sector’s future organised by the Association of the Luxembourg Fund Industry (ALFI), scheduled to take place in London.
“Even the most basic asset classes must undergo a credible process of ESG integration. That is the least that clients are requiring. And that wasn’t the case two or three years ago,” Blackie said. But, beyond that, asset management firms will have to increasingly “help clients generate an environmental and social outcome that is consistent with their values,” he added.
In Blackie’s view, the trend towards more sustainable investments could be a way for active managers to retake the lead. “I think this could play in favour of active management strategies”.
Anne Richards, CEO of Fidelity International, agrees and believes that “in two or three years, we will no longer be talking about sustainable investment, but investment full stop, as ESG criteria will obviously be integrated into the investment process.” She stressed that some ESG criteria are “not yet” financial, but will become so.
Richards believes that establishing comparable and consistent criteria is essential, whether for bond issues or to measure the key features of a sustainable project. “Trying to have some uniformity and something that ultimately resembles accounting standards but for ESG criteria, would be a crucial step. Our role is to exert pressure to obtain this standardisation,” she argued.
European regulators dealing with the risk of greenwashing
Asked about the possibility that greenwashing could be the next misselling scandal, Karine Szenberg, head of Europe for Schroders, acknowledged that this concern is shared by retail and institutional investors. However, she feels that “regulators, especially European ones, are dealing head-on with this risk.” As for asset management firms, their role is to prevent that by being transparent in methodology by releasing portfolios’ ESG results and by aligning investment principles with the company’s sustainability policy. “Most of all, we must remain very humble, as we still have lots to learn in this area,” she said.
Richards said she is “less concerned on this subject,” as “there is probably a little greenwashing out there, but I also think that asset managers are doing a lot to try to determine what works for them and what works for their clients, keeping in mind that clients don’t all want the same thing.”
In her view, greater clarity and consistency in taxonomies would help investment management firms show that they are not facilitating greenwashing.