CoreData study reveals low global take-up in ESG
A new study from CoreData Research of 200 professional fund buyers found only 7 per cent point to ESG/sustainability factors as one of the most important fund selection drivers.
Professional buyers in the UK (10 per cent) and North America (9 per cent) attach the most weight to ESG. But no respondents in Asia or Latin America say ESG is a prime selection driver, with just 5 per cent of buyers in Europe citing it as a major influence.
“The surprisingly small role assigned to ESG in the fund selection process may reflect difficulties evaluating the sustainable credentials of funds due to a lack of transparency and reported data,” says Craig Phillips, head of International, CoreData Research. “While the market has seen a proliferation of ESG funds, there are growing concerns about so-called greenwashing.”
Performance track record, cited by six in 10 (60 per cent) respondents, is seen as the most important driver when selecting funds. Professional buyers in Latin America (67 per cent), Europe (64 per cent) and Asia (64 per cent) regard past performance as particularly important, while those in the UK (50 per cent) assign it the least significance.
After performance track record, global buyers point to the investment philosophy (53 per cent) and investment selection process (51 per cent) as the next most important fund selection drivers. But far fewer buyers cite the influence of manager tenure (23 per cent), asset manager reputation (21 per cent) and fund size (18 per cent).
“This shows how professional buyers are looking beyond those factors associated with the manager and are instead focusing on fund-specific dynamics,” adds Phillips. “They are basing decisions around the particular investment approach and style and how successful it has been rather than the manager’s reputation and tenure.”
The focus on performance is seeing professional buyers conduct frequent reviews of active managers. Globally, over half of respondents conduct a comprehensive review of active managers either monthly (18 per cent) or quarterly (34 per cent).
Respondents in the UK and Latin America are keeping the closest tabs on active managers. Seven in 10 UK buyers review either monthly (20 per cent) or quarterly (51 per cent) and two-thirds of Latin American respondents review monthly (33 per cent) or quarterly (33 per cent).
Professional buyers in Europe and North America conduct less frequent reviews. About four in 10 European selectors review either monthly (19 per cent) or quarterly (24 per cent), while less than half of North American respondents carry out monthly (15 per cent) or quarterly (34 per cent) reviews.