Cost of living crisis and investor attitude towards ESG
Hello advisers,
To what extent has the challenging economic and geopolitical environment impacted the interest investors have in ESG/sustainable funds?
Thanks
Ima
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Enthusiasm for ESG/sustainable funds has wained over the past couple of years, not least because many have underperformed the wider market.
There was a time, in the heady days post-Covid, when you'd hear fund managers (many with vested intersests) talking about an 'ESG premium'. At the time, ESG funds were performing strongly, largely due to their oversized allocation to US tech stocks.
We have always been clear that, as we believe in broadly efficient markets, any constraints placed on a portfolio will lead to lower expected returns.
Clients have also become increasingly cynical of the promises made by certain fund managers. Greenwashing has become a huge problem and the fund management industry, as a whole, has not been clear enough about the challenges of making a measurable, real world impact through secondary market investments.
That said, we are optimistic about the positive impact that improved stewardship and engagment can have over the longer term.
There was a time, in the heady days post-Covid, when you'd hear fund managers (many with vested intersests) talking about an 'ESG premium'. At the time, ESG funds were performing strongly, largely due to their oversized allocation to US tech stocks.
We have always been clear that, as we believe in broadly efficient markets, any constraints placed on a portfolio will lead to lower expected returns.
Clients have also become increasingly cynical of the promises made by certain fund managers. Greenwashing has become a huge problem and the fund management industry, as a whole, has not been clear enough about the challenges of making a measurable, real world impact through secondary market investments.
That said, we are optimistic about the positive impact that improved stewardship and engagment can have over the longer term.
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There is very little demand for ESG/sustainable funds. We see that peoples main priority is to ensure they have enough money for the future. The ESG element is secondary to this.