There appears to be a disconnect between big investor expectations and their fund manager realities in the incorporation of ESG issues in decision-making, according to the latest Mercer survey. The survey was sponsored by a global alternatives manager, LGT Capital, and includes interesting views on ESG in alternatives.
Mercer has been at the forefront of ESG for consulting clients and its own funds for many years, doing research and conducting many client surveys. But the latest global survey, of 97 mainly institutional investors (and some managers), including Australian respondents, contains a few surprises. They spoke for more than US1 trillion in assets.
Entitled ‘Global Insights on ESG in Alternative Investing’, the survey results show:
> There is an unmet demand for managers who can address ESG expectations. Most respondents reported that the majority of managers they had reviewed do not incorporate ESG into decision-making.
> The extent to which respondents consider ESF varied by asset class, ranging from 22 per cent to 33 per cent through private equity, infrastructure and real estate.
> Even though investors consider ESG to lesser extent in their selection of hedge fund managers, 66 per cent still gave it consideration “to some extent”.
> In alternatives overall, 76 per cent incorporated ESG criteria in investment decision-making, but 54 per cent of these had done so for three years or less.
The researchers say the results suggested “rising expectations for asset managers over time, as investors further define their ESG frameworks”.
On a regional basis, and proportionate to the number of organisations surveyed, Europe still leads the world with the consideration of ESG issues, in the alternatives space as well as mainstream investments. For alternatives, the pecking order is: Europe, Australia/New Zealand, North America and then Asia.