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Fund managers failing on ESG reporting
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| Helga Birgden
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Fund managers are not including environment, social and governance (ESG) factors in their risk management research, a new Australian Council of Superannuation Investors (ACSI)/Investment and Financial Services Association study has found.
The research was conducted by Mercer and found only 5 per cent of the 51 fund managers surveyed included ESG in their risk research.
However, 51 per cent of managers did not see ESG as relevant to risk management in investment strategy, said Mercer head of responsible investing for Asia Pacific Helga Birgden.
“A number of members said there were impediments to ESG integration into their investment processes,” she said at the ACSI conference on Friday.
“Managers also see ESG as not helping to predict future share prices or producing short-term alpha."
Birgden said many managers felt it was the responsibility of their clients to tell them to include ESG modelling in their research processes.
“Other managers felt ESG was irrelevant when times got tougher,” she said.
But ESG is not lost on all managers, with some incorporating the process into their research processes.
Birgden said some use it as a means of checking the quality of management of a company.
“But there is this continuing problem of implementing ESG research into a manager’s processes,” she said.
“We found there was a wide spectrum of where ESG fits into a research process.”
Birgden said managers should be asking questions of themselves about ESG research.
“Does the manager consider ESG as just risk management and will that colour any findings on a stock decision?” she said.
“However, we are finding a lot of awareness of this type of research, which is supporting the belief that ESG is an evolving area.”
AUTHOR
Mike Taylor
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