Retail and institutional views on ESG. A difference of opinion?

ESG (Environmental, Social and Governance) is a fast-moving issue in the Asset Management industry, and the debate about its place in investment decisions is as lively as ever. Daily reports of newly-launched ESG funds, the divestment of industries with low sustainability scores and the growth in teams being recruited to manage responsible investments are all subjects fuelling the conversation.

Research on the institutional investment market demonstrates that the growth in interest from this group is not only very strong but is also growing fast. In Germany (where SDL will be taking the ESG debate on the 24th September), nearly three quarters of institutional investors surveyed recently indicated that sustainable investing criteria are taken into account in their investment decisions¹. Investment management companies were the highest proportion in this majority (92%), followed by churches and charitable foundations (86%). Continuing the positive note, two thirds of respondents were also convinced that sustainable investing could have a decisive impact on the global climate, arguably the most high profile reason for current interest in ESG. 

Conversely though, retail investors in Germany seem less convinced. Despite the effort being put into the marketing of responsible investing products, a separate study identified that only a fifth of German savers in the 40-49 age bracket place any importance on sustainability – this figure drops to just 18% in the 60+ age group. Encouragingly, higher figures are reported in younger age groups (31% among 18-29 year olds for instance) but, across all age groups, responsible investing took a back seat to security². 

Does this identify a divergence between the two sides of the investment market on the subject of ESG? 

Is it simply that other criteria take precedence over the drive towards more sustainable investing? 

Will the Asset Management industry fall out of step through over-supply of ESG fund products to retail investors? 

What’s certain is that the market is accelerating. Morningstar reports that 2018 saw an increase over two years of 60% in ESG fund launches. Moreover, the rate at which funds are being repurposed into ESG strategies is also very high, with double the amount (40) in 2018 over the previous year. Moreover, Asset Managers certainly appear to be practising what they preach too, with an increasing number embedding ESG principles into the firms themselves, not purely focusing on the companies in which they invest. 

We will be tapping into the debate at our forthcoming Breakfast Meeting in Frankfurt, a follow-up to our successful London event last Spring. With an experienced panel of ESG experts from across the industry, as well as attendees from the extensive Frankfurt Asset Management community, the discussion promises to be varied, lively and relevant to this critical area. 

Places are still available so why not come along and add to the debate? Register here to book your spot. 

Notes: 

1. https://www.ipe.com/news/esg/three-quarters-of-german-investors-consider-sustainability-criteria/www.ipe.com/news/esg/three-quarters-of-german-investors-consider-sustainability-criteria/10031928.fullarticle 
2. https://www.fondsprofessionell.de/news/maerkte/headline/nachhaltigkeit-ist-fuer-privatanleger-nebensaechlich-zeigt-umfrage-155355/newsseite/5/ 
3. https://www.morningstar.com/en-uk/lp/sustainable-funds-landscape