Finance

ESG is ‘no longer optional’ for asset managers, says Goldman Sachs

Funds focused on environmental, social and governance issues are “no longer optional” for asset managers and interest in them will continue to accelerate in 2021, Goldman Sachs said.

The US investment bank’s note, published on 22 February, comes as ESG-focused funds receive more and more attention, with interest having surged since the beginning of the pandemic.

“With a number of highly transformational European regulations aimed at adjusting the ESG disclosure due to come into effect from 2021, and with the new US president advocating a strong sustainable business agenda, we see ESG as no longer optional for asset managers,” the note reads.

“While industry leaders across Europe and the US have already made impressive steps to improve their integration and disclosure of ESG investing, we expect the changes to continue to radically shape the industry over the medium term,” added the analysts, who used a number of sources, including the UN Principles for Responsible Investment’s Transparency Reports from 2020.

The US investment bank’s analysts said that asset managers Amundi, DWS, Schroders and Standard Life Aberdeen had set up “solid infrastructures” that integrate ESG data within pre-existing investment frameworks.

The analysts also said that custom ESG scoring methodologies relying on in-house frameworks and expertise have the potential “to drive stronger performance” and “help capture a growing share of overall ESG AUM [assets under management] and flows”. Those that rely too heavily on third-party data “run the risk of becoming undifferentiated”, the analysts wrote.

They also observed that in Europe, the majority of ESG flows are in active funds, whereas in the US, especially with retail investors, there is a preference for passive ESG funds.

Data from Morningstar showed that sustainable investment fund assets in Europe surged by more than 50% last year, driven by bumper inflows and a record number of new product launches. Funds focused on ESG issues pulled in €233bn in 2020.

READAmundi warns more than 500 bosses that pay and bonuses must be linked to ESG

To contact the author of this story with feedback or news, email Bérengère Sim

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