Assets managed in funds that promote socially-responsible investing are growing at an annual rate of 8.5 per cent a year and set to reach $2.08 trillion (€2.88tn) by the middle of the next decade, as investors become more conscientious about where their money is put to work, according to PwC.
ESG funds, which markets themselves as focusing on investing with strong environmental, social and governance (ESG) principals, are among the fastest-growing areas in the investment world, with about $1.2 trillion of assets at the end of last year.
Many investors want ESG principals in their funds as they believe it can generate superior financial performance by mitigating reputational, operational and financial risks, PwC said in a new global asset and management report.
A PwC survey found that ESG is one of the top three priorities of investors surveyed, behind considerations over the macroeconomic and political issues and risk-return considerations, but ahead of fees. The research found that just as corporations’ ESG records are being scrutinised by analysts and rating agencies, it’s now a fundamental priority for big investment firms across the globe.
“As clients continue to align their personal interests and values with how they invest their money, ESG investing is now a must have, not a nice to have option when constructing an investor’s portfolio,” said Olwyn Alexander, PwC’s global asset and wealth management leader, who is based in Dublin.
Responsible
Last week, Irish Life announced – as part of Climate Finance Week Ireland 2019 – that it was converting its entire €15 billion book of assets under discretionary control to a responsible investment approach that will "explicitly consider" ESG factors.
Euronext Dublin, formerly the Irish Stock Exchange, also used the week to launch a new green bond hub out of Dublin for debt listed on its exchanges across Europe that adhere to certain environmental and sustainable principles.
While ESG may be one of the hottest acronyms in the asset management world, many such funds are not as green as investors might expect. Eight of the 10 largest US sustainable funds hold investments in oil and gas companies, which are regularly slammed by environmental activists, according to a Wall Street Journal report on Monday.
While most top ESG funds exclude gun makers, casino operators and tobacco groups, they have been slow to reduce their exposure to fossil fuels, which can sometimes be at odds with the language of their promotional documents, according to the report.
