Nikko AM establishes Corp Sustainability Dept, as HSBC GAM survey finds UK IFAs call for ESG ratings
Nikko Asset Management has announced the establishment of a Corporate Sustainability Department, intended to bolster its commitment to ESG both in terms of how it operates and how it approaches investing.
The new department will be overseen by representative director and executive deputy president Junichi Sayato and led from Tokyo by global head of Product & Marketing and head of Corporate Sustainability Stefanie Drews. The department is among other things tasked with working with Nikko AM’s investment teams globally to communicate the firm’s approach to ESG in the investment process.
Within the business, the department will be targeting specific ESG commitments, including “nurturing diversity and inclusion for LGBT, women, and those living with disability; monitoring adherence to local corporate governance codes; and minimising impact on the environment,” Nikko AM stated.
A microsite will detail the ESG commitments.
The announcement comes as HSBC Global Assert Management has published a survey indicating that while demand for sustainable investments is high among UK IFAs – amid interest in issues such as diversity, human rights, consumer protection and animal welfare – there is also significant demand for more related product ratings.
The survey found that of the 204 IFAs questioned, just 13% think the current ratings available for ESG products are sufficient. Over half, 57% responded that they would like a greater supply of such ratings.
HSBC GAM noted that this is becoming a crucial issue for IFAs – which act as a particularly important conduit for fund sales in the UK market – as they need to be able to demonstrate to client investors which products most rigorously align investments to their own personal values.
Also noted by the survey is that just 9% of respondents felt that investing in an ESG strategy may mean sacrificing returns. HSBC GAM stated that this indicates the “vast majority of IFAs believe that ESG strategies are good investment opportunities that can help meet client objectives”.
What is less understood is the long term impact of ESG factors, and this is hampering demand for ESG products, according to 34% of survey respondents. HSBC GAM refers to Mercer research suggesting that risks associated with climate change could lead to return loss of 0.82% annually for developed equities. Investors need to understand that such risks are already in the market, and are not limited to risks in the distant future.
Table 1 – Reasons affecting demand for ESG products
|Limited understanding of ESG issues and potential impact on investment||34%|
|No need to take ESG issues into consideration when investing||9%|
|Investing in an ESG strategy might mean sacrificing returns||9%|
|There is a lack of ESG investment products available – not enough products meet client needs||7%|
|A combination of all of the above||8%|
Table 2 – Drivers of investor interest in ESG products
|Increased interest in social concerns, such as diversity, human rights, consumer protection, and animal welfare||33%|
|Increased number of ESG investment products available – it’s easier to find ESG products that meet client needs||17%|
|Increased interest in environmental issues, such as climate change, nuclear energy, and sustainability||11%|
|Increased interest in governance of the companies invested in, such as management structure, employee relations and executive compensation||6%|
|A combination of all of the above||28%|