ASSET MANAGERS TAKE NOTE: REGULATORY RISK FOR ESG FUNDS
Fitch Ratings pointed to several high-profile regulatory findings citing misstatements and omissions by asset managers about their ESG considerations in making investment decisions for certain funds. The repercussions go beyond settlement costs with regulators and include reputational damage. The end result? Asset managers are becoming more conservative in how they present their ESG credentials (softening their claims) and in how they classify funds to comply with good governance practices and social investment objectives. Additional information is available here.
Another report by Greenwich Associates indicates that ESG considerations are increasingly driving institutional investors’ selection of asset managers. In assessing ESG credentials, the report indicates institutions are focusing on managers’ commitment to ESG and how well they communicate and provide evidence of their approach. The report notes that rather than allocating assets to specific ESG funds, they are looking at ESG more holistically, with the entire portfolio in mind. This has implications for asset managers across asset classes.