How the pandemic has changed the approach to ESG and digital

As the investment management industry continues to operate under the ongoing pandemic and faces new challenges in 2021, a special report from IM|Power last year demonstrates how business has refocused its approach to ESG and digital.

The repercussions of the COVID-19 pandemic will be felt on the asset management industry for many years to come. Although the crisis has created unparalleled upheaval and disruption across investment funds and their operating models, it has also sparked an unprecedented revolution in the sector’s approach to digitalisation and ESG (environment, social, governance).

Digital becomes a priority

When COVID-19 hit, asset managers were forced to accept that habitual trips to meet with clients and prospects would be off-limits owing to travel bans and mandatory edicts to work from home. Gail Weiss, chairman at Aon Trust Company, said these restrictions prompted the industry not only to adopt virtual communication platforms such as Zoom, but to start reporting information to clients in an electronic format. Other experts concurred. “Technology in itself is a driver for alpha, and we are investing heavily into it. We are using technology more and more to interact with clients, including our retail investors,” explained Frederic Janbon, CEO at BNP Paribas Asset Management.

At a time when margin pressure on asset managers has increased, the cost benefits of using virtual communications tools – versus the expenses associated with international travel – were also acknowledged by Janbon. Even once COVID-19 subsides, Janbon said a lot of digital practices adopted during the pandemic would be retained. “Physical contact between clients will become less frequent but not everything can be done remotely or on a video,” he said. Instead, a hybrid approach towards client relationship management is likely to emerge from the ashes of COVID-19.

ESG inflows off the charts

pre-pandemic. “Sustainability is the new standard for investing,” said Stephane Lapiquonne, managing director, co-head of continental Europe at BlackRock. While active equity funds have been inundated with client redemption requests, ESG-focused products have accumulated huge volumes of assets. Recent data shows that net inflows into ESG funds totalled $71.1 billion globally between April and June 2020, bringing their assets up to more than $1 trillion. “A green wave is happening and the crisis has dramatically increased clients’ focus and attention on climate issues,” commented Janbon.

It is not only investors who are demanding that managers focus more on achieving sustainable returns. Regulators globally have woken up to the ESG challenge. In the EU, regulators are developing a Sustainable Finance Action Plan, which among other things will subject fund managers to greater ESG disclosure and reporting requirements.

Expand your knowledge on the topics above by joining the programme of IM|Power events this year. Find out more.