In the past few years, sustainable investing has leapt from playing a bit-part in the asset management space to assuming one of the lead roles.
This comes at a time when high-profile campaigners, such as Greta Thunberg and Extinction Rebellion, continue to heap pressure on governments to take climate change more seriously.
A survey conducted by the Investment Association, published in mid-September, highlights just how popular the theme is becoming with intermediaries and investors.
The IA found that, last year, just over a quarter (26 per cent) of the UK’s assets under management were invested using a socially responsible strategy.
“Almost all of those firms which are investing responsibly were integrating environment, social and governance factors in their investment processes,” the IA said.
The report also listed four factors that are likely to continue the debate:
- The scale of concern about environmental change and its implications, probably the most potent theme at an international level.
- A growing expectation that private finance should support projects aiming at positive social impact.
- Stronger expectations of what the investment management industry can achieve in key areas of corporate oversight and holding companies to account. These include executive pay, improving board and company diversity, audit quality and long- term investment, as well as broader behaviours that may negatively impact corporate and wider economic sustainability. Recent corporate governance scandals in the UK have turned the spotlight on the responsibilities exercised by, or on behalf of, institutional investors.
- The question of corporate oversight in turn raise questions about ‘stakeholder voice’ and the extent to which mechanisms are developed to ensure that corporate decision-making is not just focussed on shareholder value but more representative of the wider society, including employees, suppliers and customers. In the UK this theme has featured in policy discussion on both the right and left of the political spectrum.
So how is the fund management industry responding to this demand?