Investors raise their expectations of ESG funds

With more companies launching sustainable funds, investors have higher expectations on impact and transparency from their fund managers, according to Stewart Investors.

The firm, which specialised in sustainable investing, launches its first Asia Pacific and Japan Sustainability fund in 1988 and now had a range of sustainable funds across emerging markets and Asia Pacific.

However, as more companies had come into the space, this had led to higher expectations and more focus on scoresheets and investment frameworks in a bid to differentiate between the different providers.

Speaking to Money Management, Jack Nelson, manager of the Global Emerging Markets Sustainability funds, said: “There are now raised expectations from investors on impact and transparency because there are more funds to choose from and as firms have got better at communicating their frameworks.

“But there can be a lot of inconsistencies between providers, a rating by MSCI might be different to one by another firm so we don’t want to rely too much on data providers.”

This was an area where Stewart Investors needed to improve, he said, in communicating their fund process to investors.

“We have one of the oldest sustainable funds and were looking at sustainability before it was in vogue.

“But, at the same time, we didn’t want to have manager David Gait appearing on buses or as a star manager, he has been good at keeping under the radar but that has come at the cost.

“We need to get better at communicating our process, we have been behind the curve and want to be more transparent.”

He said the firm did not track the launches of other funds in the space but that it was evidence that a sustainable investing approach worked and did not have to mean compromising on returns.

“There is more competition now but the proliferation of launches shows that this type of investing works. Hopefully it will influence the industry and what happens on the ground as well in terms of engagement which will lead to better outcomes for companies and for investors.”