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

Reason%
Limited understanding of ESG issues and potential impact on investment34%
No need to take ESG issues into consideration when investing9%
Investing in an ESG strategy might mean sacrificing returns9%
There is a lack of ESG investment products available – not enough products meet client needs7%
A combination of all of the above8%

Table 2 – Drivers of investor interest in ESG products

Reason%
Increased interest in social concerns, such as diversity, human rights, consumer protection, and animal welfare33%
Increased number of ESG investment products available – it’s easier to find ESG products that meet client needs17%
Increased interest in environmental issues, such as climate change, nuclear energy, and sustainability11%
Increased interest in governance of the companies invested in, such as management structure, employee relations and executive compensation6%
A combination of all of the above28%

 

 

ABOUT THE AUTHOR
Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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