2023 SUSTAINABLE INVESTMENT SURVEY

Rhetoric vs Reality

questions asked

asset managers surveyed

in AUM represented

strategies covered

For the second year running, our survey suggests that ESG rhetoric is running far ahead of reality.

Through our annual Sustainable Investment survey, our goal is to engage with managers on the effectiveness of their stewardship efforts and to help carve a path to further improvement.

But of course, the data only tells us part of the story and is not, in itself, enough to drive progress.

At Redington, we believe in the power of a clear framework to overcome even the most complex challenges.

With step one gathering the facts, in the coming months we’ll embark on step two of our framework: engaging with stakeholders at all levels of the industry to discuss objectives, current barriers to progress and best practice.

The third is working together to devise a path for collective action that will change our industry for the better. From there, we can work to implement this strategy and evaluate our success.

We look forward to sharing the output from this work in due course.

ESG Integration

%

of managers have an ESG policy, but only 82% have coverage of all strategies

%

of managers still cannot evidence ESG views driving changes in investment portfolios

%

of managers are engaging with investee companies. But less than 50% engaging with counterparties, and less than 60% with governments

Tom Picton-Turbervill

Tom Picton-Turbervill, Sustainable Investment:

“ESG has undeniably permeated the asset management industry, with 98% of managers surveyed now reporting a firmwide ESG policy. However, these are not always truly firmwide, with almost one in five (18%) managers stating that their ESG policy does not apply to all strategies.”

“Broken out by investment style, the research highlights material differences in approaches to ESG integration and engagement. ESG integration is seen as important to almost all (99%) active fundamental strategies, while it is said to be unimportant or irrelevant to 54% of passive management strategies. Conversely, a greater proportion of passive management strategies consider engagement as highly important when compared with active fundamental and active quantitative strategies. Just 12% of active quantitative strategies consider engagement as highly important, and 42% consider engagement as wholly irrelevant.”

Stewardship

  • Surveyed managers added to their specialist teams, 34% over the last 12 months 34% 34%
  • compared to almost 80% in 2022 80% 80%

%

of firms expect stewardship specialists to be effective stewards for over 500 companies each

%

of managers have no staff at all dedicated to stewardship and engagement

Paul Lee, Head of Stewardship and Sustainable Investment:

“As the integration of ESG has grown, so has the resource required to support it. While wider market conditions will have impacted the latest numbers, this is a significant hiring slow-down – perhaps indicating that, as labour markets tighten, stewardship & engagement is an area that managers are willing to cut.”

“We would hope that, regardless of how much resource is in place, managers are taking steps to ensure their ESG integration and engagement efforts stand up to scrutiny. However, the detail raises yet more questions around the extent to which these are actually influencing investment processes.”

Paul Lee

Climate Change

%

of managers monitor emissions-based metrics for their portfolios, only 38% monitor a Portfolio Alignment metric

%

of managers have made net zero commitments, these only cover 30% of strategies

%

of managers have set some form of decarbonisation target, 30% of those managers haven't yet identified the largest emitters in their portfolio

Edina Molnar

Edina Molnar, Vice President – Sustainable Investment:

“Climate change remains a key area of ESG focus, energy and resources. The commitment to decarbonising portfolios continues, with 57% of managers reporting they have some kind of firm-wide net zero commitment. The majority of commitments are to reach net zero emissions by 2050, in line with the global emissions reductions required to meet the goals of the Paris Agreement.”

“Of all strategies with a decarbonisation target, some 15% are yet to identify the largest emitters in the portfolio. This is a crucial first step for understanding the emission profile of a fund – i.e. baselining for the decarbonisation objective – as well as that of the underlying assets, enabling a manager to identify how the strategy will achieve its goals. This tends to undermine our trust in the robustness of these decarbonisation targets.”

Impact

The highest proportion of firms managing impact funds are headquartered in the US and UK

%

of managers currently manage at least one impact fund

manager is seeking to launch an EM-centric impact fund in the next 12 months

Celine Grace Legaspi, Vice President – Manager Research:

“Since our previous survey, we have observed increased attention on impact investing – with 41% of managers in our universe currently managing at least one impact fund (up from 39% in 2022). This represents over £859 billion of capital invested in impact solutions (compared to an overall universe of £38.5 trillion AUM). Interestingly, 88% of asset managers who will launch an impact fund in the next 12 months already have an existing impact strategy in place.”

“In terms of regional preference, managers tend to have a focus on investing in developed-market or global portfolios. We recognise a large funding gap in emerging markets – with only one manager in our universe seeking to launch an emerging markets-centric impact fund in the next 12 months. We hope to see this trend change as we believe there are attractive opportunities in emerging markets’ impact (see more here), and it is a crucial region for investment to ensure sustainable and equitable development.”

Celine Grace Legaspi

Inclusion & Diversity

  • Investment teams on average are made up of 23% women 23% 23%
  • and 77% men 77% 77%

%

of managers have targets relating to DEI factors, with just 15% of strategies undertaking any type of DEI reporting for their funds

%

of strategies disclose investment team ethnicity splits

Sarah Miller

Sarah Miller, Senior Vice President – Manager Research:

“Most managers suggest they are not just committed to DEI for its own sake, but also believe that more diverse teams help them maximise success. Almost all (96%) believe that diverse teams create a culture of success and improve their ability to deliver a more effective investment strategy, while the remainder neither agree nor disagree. Digging deeper into current policies and financial commitments, however, we see a less persuasive story.”

“For example, less than 50% of managers have targets relating to any DEI factor. Gender is the most common factor among managers with targets (49%), followed by race (32%) and inclusion (32%). The incentives for meeting DEI KPIs where they exist is also questionable, with only 37% of managers linking senior remuneration to these metrics. This proportion has fallen slightly from the 41% recorded in 2022.”

Explore the findings in more detail in the full report

Key contacts

If you would like to speak to a member of the team, please contact:

Anastasia Guha

Anastasia Guha

Global Head of Sustainable Investment

I am a sustainable investment specialist with over 15 years’ experience, most recently with the United Nations supported Principles of Responsible Investment, where I led a team supporting 1400 investors to implement environmental, social and governance criteria into investment strategy, decisions and stewardship. At Redington, I am responsible for leading the firm’s global sustainability strategy, […]

Paul Lee

Paul Lee

Head of Stewardship & Sustainable Investment Strategy

I have spent 20 years in leading roles in stewardship and ESG integration. First at Hermes, where I helped create and build the world-leading stewardship business Equity Ownership Service (EOS), and latterly as the first global head of governance - stewardship at Aberdeen Asset Management. For the last three years, I've been an independent consultant advising asset owners and fund managers on ESG issues, and leading projects for investor organisations including the PRI, Investor Forum, CFA UK, PLSA and ICGN.

Pin It on Pinterest