Saint or sinner? 3 questions Investment Managers need to consider when developing their ESG proposition

The latest FTfm was focused on sustainable investment. Along with Morningstar data showing that sustainable funds just had their second best ever quarter of net inflows despite the market turmoil. The coverage is a timely reminder of the remaining importance of ESG issues for investment managers and their clients.

Rightly, the coverage highlighted how the COVID-19 pandemic has significantly increased focus on the Social aspect of the ESG triumvirate, and also encouraged corporates that “now is the time to emerge as a corporate ‘saint’ not ‘sinner’”. 

Investors looking to engage on these issues must be sensitive to the deep short term challenges many companies are experiencing, with impacts to both their business model and operations; but companies and executives should expect their investors and customers future interactions to be influence by how they act through the pandemic.

We believe there are three key questions investment managers should be considering as they look to develop their ESG proposition:

• How is the investment manager itself living the ESG values? Will the firm emerge as a saint or sinner in the way it has navigated the pandemic?
• How does the firm currently incorporate ESG criteria in the investment process and report that to clients? How does this line up with the European Commission’s taxonomy?
• What impacts will ESG have across your whole firm? This will range from managing the data required to assess and report ESG of portfolio companies through to ensuring clients are invested in products that are suitable for their ESG preferences.