The study, which is based on in-depth interviews with asset managers who collectively manage more than €9-trillion in assets, shows that there is to be no-let up in the number of products coming to market after what can already be considered a boon year for the responsible investment industry.
In August, the Financial Times reported that Morningstar showed record net inflows of $71bn into ESG funds between April and June 2020, taking the total assets invested in ESG funds to just over $1 trillion. The trend has been even more pronounced in the UK, with fund flow data by Calastone revealing that the amount of new money invested in ESG equity funds between April and July exceeded the combined flows for the previous five years.
Perhaps in conjunction with this ‘green rush’ to market, concerns about greenwashing have also become increasingly prevalent. 94% of respondents said that they were concerned about a wider industry trend of greenwashing by asset managers, up almost 30% from last year.
This rising concern may in part explain the reassessment by firms of their own ESG credentials and where they sit relative to peers, as a sense of realism around ESG appears to have finally settled on the asset management industry after a number of years of it growing increasingly dominant as an issue for organisations to grapple with.
Last year, when we asked asset managers how they would rank themselves on the spectrum of ESG, 65% believed they were either pioneers or early adopters of the concept. This has fallen to 44% in 2020 (Figure 1). In particular, the biggest shift was seen in the number of managers who believe they are pioneers, having fallen from 40% of those surveyed in 2019, to just 17% in 2020.
That said, even the true pioneers are acutely aware of the increased cannibalisation of their space, with one saying that while they were, and are, a pioneer: “that doesn’t mean we’re at the forefront of the industry and there is a very real risk of being overtaken.”
Whilst much has changed for the asset management industry in the last 12 months, on ESG it appears there has been a slow reckoning with the truth as managers become increasingly cognisant of the industry’s evolution, and perhaps even more so of progress made by peers.
That doesn’t mean, however, that managers won’t be aiming to capitalise on the continued demand for ESG products – if anything, 2021 is likely to see the ‘green rush’ accelerate still further.
Figure 1: Annual change in perception of how asset managers view where they sit on the spectrum of ESG