Traditional Investment Managers View ESG as a Differentiator

Published on:
by KnowESG
investment manager-934662002-aad45667e8124ac185d3723f965ea19f

Traditional investment managers (IMs) are increasingly promoting their ESG credentials to investors to differentiate themselves from competitors, Fitch Ratings says in a new report following a review of the sector.

Disclosure requirements for sustainable products are one of the main regulatory themes facing the industry. The EU implemented its Sustainable Finance Disclosure Regulation in 2021 to make funds more transparent and easier to assess in terms of sustainability. Regulators in other regions are taking similar initiatives.

Sustainability disclosure requirements create an opportunity for traditional IMs to differentiate their offerings and potentially gain market share as investor demand for sustainable products increases. Most of the demand has been from institutional investors, but there are signs that ESG momentum is gaining traction with retail investors, too. Sustainable fund net inflows accelerated in 2020–2021, and although the pace slowed in 1Q22, it did not slow by as much as that of conventional funds.

Traditional IMs have been cautious about marketing products as sustainable to avoid claims of ‘greenwashing’, particularly as definitions of ‘sustainable’ are still being harmonised. Regulators are increasingly acting to deter and penalise greenwashing.

In May 2022, the SEC charged the fund-management arm of BNY Mellon for misstatements and omissions about ESG considerations in making investment decisions, which led to a USD1.5 million penalty. The SEC, along with BaFin, is also investigating Germany’s DWS Group over greenwashing claims.

Featured Article: BlackRock: Why The Finance Industry Is Hesitant To Ramp Up ESG Efforts

Notwithstanding the risks of greenwashing, we expect sustainable product offerings to become increasingly important as a competitive necessity, particularly as sustainability definitions become more harmonised.

Fitch’s sector review also concluded that rated traditional IMs’ are well-placed to withstand near-term market challenges given their robust financial profiles and well-established franchises, but that net inflows and net asset value-based fees could remain under pressure.

Source: Fitch Ratings

For more investor-related news


Investors Headlines

IHS Towers Releases 2023 Sustainability Report

IHS Towers Releases 2023 Sustainability Report

TriNet Earns Top ESG Rating from ISS ESG

TriNet Earns Top ESG Rating from ISS ESG

PATRIZIA Strengthens ESG Team for Impact Investing

CapitaLand Investment Steps Up Sustainability Efforts

Sustainability Tops CEO Agendas for Growth, Says Survey

Hershey Releases 2023 ESG Report

SIDC Updates ICF for Sustainable, Shariah Finance

LONGi Showcases ESG Leadership in 2023 Report

Australian Businesses See Lag in ESG Progress

Singapore Leads in Corporate Sustainability Reporting