Hedge funds improve approach to ESG

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Swiss asset manager Unigestion has conducted a worldwide survey on the hedge fund and private asset managers’ approach to environmental, social and governance criteria (ESG).

Yet a majority of hedge fund managers surveyed (60%) are still reluctant to introduce ESG into their strategies.

However, Unigestion has spotted an improvement since the same survey was last conducted in 2011, as the number of hedge fund managers incorporating ESG has grown from 25% to 40%.

The report also showed that the adoption of ESG depends of the hedge fund strategy run. “A quarter (25%) of equity-related strategy managers (long-short equity, equity market-neutral) were deemed ‘leaders’ compared to only 5% of tactical trading strategy managers (global macro, CTA, commodities)”, Unigestion pointed out.

Private asset managers which were interviewed for the first time appeared more advanced in introducing ESG in their investment approach than their hedge fund counterparts, said Unigestion. Among the respondents, only 27% of private asset managers would be reluctant to adopt ESG.

Among private asset managers, the survey showed buyout managers attached more importance to ESG  with only 11% of buyout managers indicating reluctance to incorporate ESG, compared to venture and growth or special opportunity managers, where 60% and 63% respectively expressed reluctance.

The survey highlighted the fact that European hedge fund and private asset managers are more likely to show an interest in ESG in comparison with US-based firms. In addition, “large private asset managers are also more likely to adopt ESG investment approaches than smaller firms”, Unigestion said.

Eric Cockshutt, responsible investment coordinator at Unigestion, commented: “It is increasingly widely recognised that incorporating ESG criteria in investment processes can have a positive impact on a portfolio’s risk-return profile, both through generating opportunities and reducing risk.

“Although there has been clear progress since our last survey three years ago, the adoption of ESG criteria is still at an early stage in the hedge fund universe. Private assets managers are much more advanced, as ESG policies are increasingly being considered as a driver of value creation amongst private equity investors.”

 

 

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