ESG & asset management

My-Linh Ngo 80 x 80.jpg
My-Linh Ngo
December 29, 2020

3 steps for industry progress in 2021.

The uptake of integrating ESG factors into investment strategies to-date has largely been left to the underlying investor to determine what’s a priority for them. But things are shifting. We are starting to see an increasing role for regulation institutionalising ESG within the industry.

It’s important we get the right type of regulation and that market participants are proactive in recognising the need for good practice. As an asset manager, we are looking to play our part in providing innovative investment solutions that meet the evolving needs of investors and society.

As we shift into the new year, we’re looking for three key developments in the industry for ESG progress:

1. Recognition that there is a spectrum of approaches to ESG, but an ESG-aware approach should be standard.

There is no one definition of what makes a strategy ‘ESG’. Investors all have different ESG priorities and requirements and one preference is not necessarily more valid than another. But ‘ESG aware’ investment practices should be the base minimum – understanding the range of impacts investment decisions have on society beyond the narrow lens of financial metrics and incorporating a broader definition of impact/return, alongside time horizons for evaluating that performance.

2. Quality not quantity when it comes to ESG data and tools

This is becoming more of an issue as ESG interest has grown. While it is true in some instances there is a need for more data, overall, we believe the biggest issue is having the right type of data or tools which will add value when making investment decisions. We should also recognise data is only a starting point, not the end point for ESG, and that action can occur in the absence of information.

3. Disclosure, disclosure, disclosure

As investors, we need to be transparent about our approach to ESG to help our clients and potential clients navigate the space and understand which managers best meet their ESG needs. We need to build confidence in the ESG market to avoid allegations of ‘green’ or ‘rainbow’ washing. This is where we think regulation can be most helpful in establishing a level playing field.

Click here for more information on ESG at BlueBay.

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