ESG Fund Fees, Policy Recommendations, and Looking into the Future
Here are 5 things you might have missed this week:
CFA's Future of Sustainability in Investment Management-
In a quite comprehensive report, CFA tries to answer what is the purpose of the investment management profession, how does it contribute to the greater good of society, and what is its role in sustainability.
Although the future of sustainable investing includes many unknowns, we advance three important tenets where sustainable investing goes further than its forerunners: 1. It is additive to investment theory and does not mean a rejection of foundational concepts. 2. It develops deeper insights about how value will be created going forward using environmental, social, and governance (ESG) considerations. 3. It considers many stakeholders.
In many ways, we are moving from sustainable investing as a good idea to a reality that has implications for all investment portfolios. There is a growing recognition that some ESG factors are economically material, especially in the long term, and it is, therefore, important to integrate material ESG factors in investment decisions.
Pressure to Bring Down ESG Fund Fees-
How much of a premium are investors willing to pay for ESG funds to achieve a positive impact, and how will full integration affect fees in the active and passive space?
"First, we are starting to see more sustainable products in the market, and with increased competition comes increased cost pressure. Second, as managers start to incorporate ESG and sustainable practices more fully into their standard risk assessment process, it becomes harder to justify higher fees to clients for doing 'additional work'"
While in the past, sustainable funds might have charged in excess of 1%, currently they tend to have much lower introductory rates, usually around 0,45%.
According to Refinitiv Lipper, ESG funds have shown a steady decline in fees, and today fees for ESG alternatives are broadly in line with non-ESG counterparts in both the active and passive space.
SASB's ESG Integration Insights – 2020 Edition-
Case studies to help demystify how investors use ESG data and illustrate why they’re seeking improved information via SASB-based disclosure.
SASB’s ESG Integration Insights series provides practical examples of institutional investors using SASB Standards to systematically and rigorously integrate ESG into their investment processes. SASB Standards have become a valued piece of market infrastructure used to evaluate ESG-related risks and opportunities.
The 2020 edition includes contributions from Generation Investment Management, Neuberger Berman, Partners Group, StepStone Group, Temasek, and Wafra.
The enclosed case studies, written by leaders at these investment companies, detail many of the ways in which their organizations use SASB Standards, including to engage with companies, analyze performance, and inform investment decisions.
Private Capital, Public Good-
The U.S. Impact Investing Alliance published a new report, titled: “Private Capital, Public Good: Leveraging Impact Investing to Support a Just and Equitable Recovery.”
The comprehensive report includes 12 specific policy recommendations and ideas with the potential to catalyze more impact investments to help address urgent social, economic and environmental challenges. These policy recommendations will be shared with the incoming Biden-Harris Administration, federal regulators and members of Congress to help build and shape an agenda for the next two years of policymaking.
The 12 recommendations are grouped under two main narrative themes: Transforming Community Investing to Confront Inequality and Accelerating Stakeholder Capitalism to Advance American Economic Leadership.
Net Zero Asset Managers Initiative-
Launch of a high ambition commitment backed by 30 global investors with a combined AUM of over US$9 trillion to support the goal of reaching net-zero emissions by 2050 or sooner.
"In line with the best available science on the impacts of climate change, we acknowledge that there is an urgent need to accelerate the transition towards global net-zero emissions and for asset managers to play our part to help deliver the goals of the Paris Agreement and ensure a just transition."
The initial 30 Net Zero Asset Managers signatories are: a.s.r. Asset Management, Anaxis Asset Management, Arisaig Partners, Asset Management One, ATLAS Infrastructure Partners, AXA Investment Managers, BMO Global Asset Management, Calvert Research and Management, CCLA Investment Management, Clean Energy Ventures, DWS, FAMA Investimentos, Fidelity International, Generation Investment Management LLP, Gulf International Bank Asset Management, Handelsbanken Fonder AB, IFM Investors, Inherent Group LP, Kempen Capital Management, Legal & General Investment Management, M&G plc, New Forests Pty Ltc, Nordea Asset Management, Robeco, Sarasin & Partners LLP, Schroders, Swedbank Robur, UBS Asset Management, Wellington Management and WHEB.
One more thing: McKinsey's recap of 2020 for asset managers. The events of 2020 shook the industry, but a rebound followed. Forward-looking firms will now take stock of what has changed and what has not in a new operating environment.
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