Nearly 90% of the US asset manager product executives surveyed said incorporating ESG into investment products and processes is at least a “moderate priority”, according to Cerulli Associates’ latest report, Global Markets 2021: Continued Growth in Uncertain Times.
“We expect the spread of ESG investing to continue around the world to varying degrees,” said Andre Schnurrenberger, managing director, Europe at Cerulli Associates.
“Over the past year, we have seen two key trends in this area. One is that both retail and institutional investors are showing increasing demand for sustainability; the other is that responsible investment products have outperformed consistently, even in the face of significant challenges.”
In the US, demand from both retail and institutional investors has increased, noted the report, and managers anticipate increased demand due to multigeneration wealth transfer.
When making investment choices, surveyed US investors think it is important for asset managers to have an articulated mission and a diversity and inclusion (D&I)-centric culture. Allocators are also digging deeper into firms’ D&I policies, requesting greater transparency in pay equity, profit sharing, and equity ownership.
Other parts of the world also saw an increased interest in ESG funds. In Hong Kong, there is high demand from distributors last year on thematic funds that seek to access opportunities created by the long-term structural changes in sectors such as technology, biotechnology, and sustainable investing.
Healthcare-focused funds also gained popularity amid the coronavirus pandemic, the report shows.
In Europe, 30% of the asset managers surveyed in Italy expect a high demand for sustainable thematic funds and impact investing funds in the country over the next one to two years.
Several asset managers in France interviewed said they are focusing on expanding and repurposing existing funds offerings into ESG over the next year as pension funds increasingly favour sustainable investment strategies and those that focus on the transition to a low-carbon economy.
Dutch asset managers told Cerulli that they plan to launch fixed-income and multi-asset funds that incorporate ESG factors this year, catering more risk-averse investors. The Netherlands responsible investment market is currently dominated by EGS equity funds.
With responsible investment showing no sign of slowing, “asset managers that can offer specialized value propositions that focus strongly on specific ESG factors will find a receptive audience,” said Schnurrenberger.