ESG and digital: helping investors grow market share

For several years now, asset managers have been ramping up their digitalisation efforts and attempting to integrate ESG (environment, social, governance) into their investment portfolios.

By doing so, asset management companies hope to retain and grow their investor market share, as this report from IM|Power last year explains.

Learning to love data

Speaking at Fund Forum, Alexandra Altinger, CEO, UK, Europe and Asia at JO Hambro Capital Management, said investment firms were allocating enormous amounts of resources to improving their data. “I think data is the new gold and it will provide a huge competitive advantage,” she said.

In addition to facilitating greater automation, effective data management can also improve client experiences by allowing investors to access information and reports more easily.

Altinger also said robust data was a powerful investment tool, enabling managers to conduct performance analytics.

ESG: COVID-19 provides the spark

ESG has been omnipresent in asset management circles for several years, but COVID-19 is likely to accelerate it even further.

Erich Gerth, CEO at Bluebay Asset Management, said he was relieved that COVID-19 did not lead to an abandonment of ESG principles, but rather a picking up of the pace. He continued that ESG was now firmly embedded in a lot of what the business did. Moreover, he explained that COVID-19 was also likely to usher in advancements around diversity and inclusion, especially with people working from home enabling them to enjoy a more flexible work-life balance.

Whereas before, some asset managers were guilty of greenwashing their investment portfolios, this is becoming more of a rarity. Investors are now incredibly astute about ESG, and are scrutinising managers more than they were before about sustainability. Altinger said the introduction of the ESG taxonomy as part of the EU’s Sustainable Finance Action Plan and the UK’s revised Stewardship Code meant fund managers must now demonstrate how they embed ESG into their investment practices.

Under incoming EU rules, asset managers will need to disclose how they integrate sustainability risks into their business practices and investments, in what should help bring about greater transparency.

Although asset managers have been applying ESG principles to their strategies, Bettina Ducat, CEO at La Financière de l’Echiquier said firms were likely to focus more on impact investing. Impact investing is when asset managers look to generate a financial return while simultaneously having a measurable social or environmental impact. Oftentimes, ‘impact’ is measured in terms of adherence to the United Nations (UN) Sustainable Development Goals or other metrics. However, one of the challenges is that measuring impact – particularly social impact – can be very subjective with investors often having their own bespoke approaches.